New Pension Scheme: Choose plan to suit risk profile

New Pension Scheme: Choose plan to suit risk profile

Under the New Pension Scheme (NPS), investors save money which is put into the capital market. The sum which you will get after retirement will be dependent on the performance of the capital market. You can make monthly or weekly contributions to the NPS. But for every contribution, your transaction cost will increase.

Prior to NPS, there was the Defined Benefit Plan -one would get certain pension fixed for life. The postretirement proceeds were fixed and if there is a shortfall in this corpus, the government would make good.

NPS is a Defined Contribution Plan where the returns will not be fixed. You will only get what you have contributed and returns that the fund manager generates on it. All new entrants to the central government services (other than armed forces) after January 1, 2004, will compulsorily join this scheme. All citizens, including NRIs, aged 18 to 60 can voluntary join the scheme. The exit age is 60 years.

A minimum contribution of Rs 6,000 is compulsory per year. The minimum amount per contribution is Rs 500 and a minimum of four contributions in a year for each subscriber account is required.

Under the NPS, each subscriber is allotted a unique 16-digit Permanent Retirement Account Number (PRAN). This number is portable. The records of transactions are maintained by the Central Record Keeping Agency (CRKA). The subscriber has the option to invest with seven pension fund managers (PFMs). He also has the option to choose any one or more PFMs to manage his contribution. These PFMs will have three kind of funds categorised as 'E' for equity funds, 'G' for funds investing in government securities and 'C' for fixed income securities other than government securities.

There are two types of accounts:

Tier I account where you cannot withdraw

The Tier I account is the basic NPS account that is non-withdrawable till retirement or death of the subscriber. In this account, the total corpus at retirement age is split, where a minimum of 40 percent of the final corpus has to be compulsorily used to buy an annuity while the subscriber is free to withdraw the remaining 60 percent as a lump sum or in instalments.

Tier II account where you can withdraw

The Tier II account is available to only to those who are existing subscribers of the Tier I account. The money contributed into this account can be freely withdrawn as and when the subscriber wishes to except for a minimum balance that needs to be maintained at the end of each financial year.

Charges

The NPS levies an investment charge of .00009 percent of the assets under management. Initial charges of account opening is around Rs 470. From the second year onward the charges are Rs 350 per annum. Also, a charge of Rs 10 is applicable for each transaction. One can make monthly or weekly contributions. But for every contribution, your transaction cost will increase.

Fund managers

These are managed by fund managers. Currently, seven fund houses appointed by the government are available under the NPS.

These are:
LIC Pension Fund Limited SBI Pension Funds Pvt Limited UTI Retirement Solutions Limited IDFC Pension Fund Management Company Limited ICICI Prudential Pension Funds Management Company Limited Kotak Mahindra Pension Fund Limited Reliance Capital Pension Fund Limited

Schemes

There are three schemes available under the NPS.

Fund C

In case you invest in this fund, all the money will be invested in fixed income instruments such as corporate bonds and government securities. One should consider investing in this fund if the risk appetite is medium as corporate bonds are not that risky.

Fund E

In case one invests in this fund, a portion of not more than 50 percent of the invested money will be put in equity. You should choose this retirement plan only if your risk appetite is high, as up to 50 percent of your money will be linked to the performance of equity.

Fund G

In this case, all your money will be invested in government securities. Hence, this is suited for risk-averse investors. One can choose to invest in any of these funds. You may also invest in a mix of these funds. If you do not choose between these funds, your contributions will be invested in a fund with 15 percent in equity, 45 percent in corporate bonds and 40 percent in government bonds. With increase in age, after 35 years, the government bond exposure will increase with a maximum limit of 80 percent and 10 percent each in equity and corporate bonds.

Fixed income pension plan

The government has proposed to extend the 'fixed income pension plan' to workers in the unorganised sector. The monthly contributions one makes will be invested as per NPS guidelines. The State funds for the savings scheme will be added to this. If any gap exists between the sum guaranteed and sum generated from the two steps, the central government will provide the required funds.

The new plan will be started off initially in Haryana, Karnataka and Andhra Pradesh. This amendment is meant only for workers in the unorganised sector. Central and State government employees will continue to get pension through NPS.

Tax benefit

Presently, NPS does not offer any tax exemptions unlike other retirement plans. It falls under the category of exempt-exempt-tax (EET) system which means that maturity benefits you receive after retirement will be taxable. However, with the Direct Tax Code coming in NPS will be tax exempted on withdrawal too.

Source: Economic Times

Retailing of New Pension Scheme through Post Offices begins...

Disbursement Of Wages Through Post Offices Under NREGS expands

Retailing of New Pension Scheme through Post Offices begins

A Bouquet of Mutual funds “Ujjawal Bhavishya” in Post Offices Launched

The Department of Posts (DoP) opens about eight lakh new “Mahatma Gandhi NREGS’ accounts every month across the country. Till 30th June 2010 has DoP opened 4.48 crore accounts under the scheme and disbursed an amount of Rs. 3,406 crores in the current financial year. More than 95,000 post offices are engaged in disbursement of wages under MGNREGS.

In a tie up with Pension Fund Regulatory and Development Authority DoP has started retailing of New Pension Scheme (NPS) through post offices in the country. So far 5186 NPS accounts have been opened in Head Post Offices in 20 Postal Circles.

As a part of financial inclusion, the DoP in another tie up with UTI Mutual Fund has launched “Ujjawal Bhavishya”, a bouquet of mutual funds relating to Retirement Benefits Pension Fund, Mahila Unit Scheme and Children’s Carrer Balanced Funds in all post offices in the country. The scheme has the convenience of systematic investment plan. It will enable investors in small towns and cities to avail investment opportunities through post offices.

Source: PIB

Banks, insurers, Konkan Rly to join new pension scheme

Banks, insurers, Konkan Rly to join new pension scheme

The New Pension System will get a boost with many banks, insurance companies, Konkan Railway and Damodar Valley Corporation slated to put their retirement corpus into the contributory pension scheme.

“Damodar Valley Corporation and Indian Banks Association are coming in. The Konkan Railway has shown interest. Some insurance companies too are likely to join the scheme. There are lots of companies which are showing interest now,” an official with the P ension Fund Regulatory and Development Authority (PFRDA) said.

The Indian Banks Association, according to the official, has said new bank recruits who join from April 2010 will be included in NPS. Besides, insurance companies are looking at similar provisions for their new employees.

“Companies which do not have the EPFO liability can directly come to us. Those who have EPFO liability can make contribution over and above EPFO,” the official said, adding the fund managers would be decided by companies themselves.

There are six fund managers for the citizens’ scheme. These include IDFC Mutual Fund, Kotak Mahindra, SBI, UTI Asset Management, ICICI Prudential Life Insurance and Reliance MF.

Initially, the NPS was launched for the Central government employees joining service from January 1, 2004, but from last May it was extended to all citizens.

According to the information available on the PFRDA Website, as many as 8,78,713 subscribers have joined the NPS till last month, which include 5,532 from the unorganised sector. Out of this, a large majority of 6,09,376 subscribers are the Central gover nment employees, apart from 2,55,903 state government employees.

National Aluminium Company was the first public sector undertaking to move its employees retirement funds to the New Pension System to a contribution of 6 per cent of the basic pay into the NPS.

Source: PTI

Govt gives assent to new penion system

Govt gives assent to new penion system

Giving approval to appoint New Pension Systems (NPS) Trust for fund management and other services and the Draft Agreement for signing the New Pension System (NPS) Trust, New Delhi and to adopt the scheme for fund management on the pattern of Government of India a recent state cabinet meeting has pledged to do everything in its power to promote the welfare of the employees of the state.

According a highly placed official source, with a view to introduce pension reform and establishing a solid and sustainable social security arrangement in the country, the Central government notified the Defined Contribution Pension System (New Pension Scheme) for the new entrants to Central government services, except for the Armed Forces, replacing the existing system of Defined Benefit Pension System with effect from January 1, 2004.

The source further mentioned that the matter was tabled in a recent cabinet meeting as an agenda for signing of agreement between the state government and the New Pension System (NPS) Trust, to keep pace with the Central government, as state government also introduced the said New Pension Scheme with effect from January 1, 2005.

Necessary instructions had been issued for recovery of 10% of Pay, Dearness Pay and Dearness Allowances from the monthly salaries of employees appointed on or after January 1, 2005 and for crediting to government account number 8342, other deposit and for debiting the equal share of the state government for Tier-I.

The source said the system is mandatory for all new recruit to the state government service and the existing provision of the Defined Benefit Pension and GPF would not be available to the new recruits.

In addition to the above Tier-I pension account, each individual may also have a voluntary Tier-II withdrawable account at his option.

But, the scheme for voluntary contributions under Tier-II will be made operative during the period of interim arrangement and therefore no recoveries will be made from the salaries of the employees on this account.

The official source further mentioned that as per the agreed guidelines of New Pensions System Trust, an individual can normally exit at the age of 59 or 60 as the case may be. At exit the individual would be mandatorily required to invest 40% of the pesnsion wealth to purchase an annuity (from an IRDA-regulated Life Insurance Company) which will provide for pension for the lifetime of the employees and his/her dependent parents/spouse at the time of retirement. The individual would receive a limp-sum of the remaining pension wealth, which he would be free to utilize in any manner.

Individuals would have the flexibility to leave the pension system prior to age 59 or 60, as the case may be. However, in this case, the mandatory annuitisation would be 80% of the pension wealth.

The guidelines of the trust, further mentioned that, a pension Fund Regulatory Development Authority (PFRDA) has been appointed under executive order of the Ministry of Finance, Government of India pending passing of the PFRDA Bill by the Parliament. PFRDA has signed a contract agreement with the National Security Depository Limited (NSDL) as Central Record keeping agency for administration and customer service for all subscribers of the NPS, issue of unique Permanent Retirement Account Number (PRAN) to each subscriber, maintaining a database of alls Prans issued and recording transactions relating to each subscriber’s PRAN and action as an operational interface between PFRDA and others NPS intermediaries, such as Pension Funds, Annuity Service Providers, Trustee Banks etc.

The official source further mentioned that while tabling the issues before the recent cabinet meeting, it has been mentioned that the CRA system has become operational with effect from June 2, 2008 for Central government employees. The state government of Manipur has already decided to avail the services of the CRA and an agreement has been signed with the NSDL on November 12, 2009 last year.

So far, there are 5,813 new entrants who are appointed under state government on or after January 1, 2005 in 32 departments. Of these recoveries salaries of 5,459 employees have been made but government’s matching share has not been paid by most of the department.

Reconciliation of accounts with those of AG’s figure shall be carried out before the transfer is effected to the trustee Bank. With this elaborate submissions of guidelines of the trust, the recent cabinet meeting has approved to solicit to appoint New Pension System (NPS) Trust for fund management and other services and the Draft Agreement for signing with the New Pension System Trust, New Delhi and adopt the scheme for Fund Management.

Source: Kanglaonline

Pension funds face quarterly review

Pension funds face quarterly review
Funds under the New Pension Schemes (NPS) managed by SBI Pension Fund — an arm of State Bank of India — has outperformed its rivals for the fiscal gone by, data on the pension regulator’s website revealed. Pension laws mandate that fresh annual allocations to fund managers be made on the basis of their performance in the past year.

Pension Fund Regulatory and Development Authority (PFRDA) has now instituted an independent, quarterly review of the seven pension funds for monitoring their performance and compliance to investment guidelines. Morningstar, a mutual fund data research firm, will be conducting periodic reviews on fund managers, its CEO Aditya Agarwal told ET.

SBI Pension Fund has performed better than its rivals with highest net asset value for both central and state government scheme in 2009-10. For Central government employees schemes, SBI Pension Fund NAV ended March 31 at 12.77, LIC Pension Fund at 12.35 and UTI at 12.33, according to the PFRDA website.

Employee’s Provident Fund Organisation (EPFO) has traditionally provided retirement benefits to government employees. However, civil servants, who were recruited after 2004, are now part of the NPS — a system aimed at encouraging private fund managers. According to estimates, its current corpus stands at around Rs 4,700 crore.

Up for grabs now are their contributions this year — expected to be in the Rs 2,400-crore range. PFRDA allocates fresh accretions every April, depending on the performance of each of the three funds.

In the first year of NPS, PFRDA allocated only Central government employee contributions and last year, it additionally allocated funds to state government pension funds. For state government schemes, SBI Pension Fund’s NAV stood at 10.63, LIC Pension at 10.60 and UTI at 10.59, as per PFRDA data.

Industry officials say the pension fund allocation of Central and state government employees is expected to take place sometime in the second or third week of April. Last year, the allocation was made sometime in May. For 2009-10, PFRDA has allocated 40% to SBI Pension, 31% to UTI Pension and 29% to LIC Pension.

Under NPS, employees have to contribute 10% of their basic salary and dearness allowance, with a matching contribution from their employers. The NPS was thrown open to the unorganised sector last year and private players were also allowed to operate as fund managers. However, the response to NPS from the general public has been modest.

In addition to SBI, LIC and UTI, ICICI Prudential, IDFC, Kotak and Reliance MF also manage pension funds.

Source:Economic Times

Govt staff pension funds to hike equity investments by this fiscal

Pension funds managing the New Pension Scheme (NPS) for Government employees will conform to new investment guidelines by the end of this fiscal, said fund managers.

The Pension Fund Regulatory and Development Authority (PFRDA) has issued the new investment guidelines last week, allowing higher investment in equities to fund managers.

Pension funds managing the NPS for Government employees will be able to invest up to 15 per cent of their corpus in equities. The earlier limit was 5 per cent.

The NPS for Central Government employees has a corpus of around Rs 3,000 crore. Of this, around Rs 1,600 crore is managed by SBI Pension Fund, and the remaining Rs 1,400 crore by UTI Retirement Solutions and LIC Pension Fund.

Though the change in the investment pattern was announced some time ago, the communication came only now, said an official with a pension fund house. “Earlier, even though we wanted to invest in stocks of companies based on our assessment of risk and return, we were hindered by the regulation,” the official said.

Flexibility

The investment pattern was relaxed to give more flexibility to pension fund managers. Under the NPS for the unorganised sector where the investors get the option of the investment pattern, majority of the investors have opted for 50 per cent equity.

Earlier guidelines for NPS for government employees mandated that pension fund managers invest at least 25 per cent of the funds in Government securities, 15 per cent in State development loans and 25 per cent in bonds issued by public sector undertakings (PSUs) and public financial institutions (PFIs).

However, investment in equities was capped at 5 per cent and investment in bonds issued by private companies was capped at 10 per cent.

According to the new guidelines, investments in Government securities and State development loans have been put under one bracket and capped at 55 per cent. A limit of 40 per cent has been imposed on investment in bonds issued by PSUs, PFIs and corporates.

Fund managers can also invest in money market instruments such as Treasury bills, commercial papers and certificate of deposits subject to a cap of 5 per cent.

Earlier, pension fund managers could invest only in stocks of companies whose bond issuances have been rated by credit rating agencies. This ruled out stocks of companies which do not raise debt.

Derivative rule

Now, fund managers can invest in stocks of companies listed on the BSE and NSE provided they are present in the derivative segment.

Pension fund managers will also be able to churn their portfolio some more with relaxation in tradeable limits. Earlier, 10 per cent of the Government security portfolio and the whole of the equity portfolio were tradeable. Now, fund managers can trade subject to a cap that the trading volume is twice the holding.
Source:Hindu Business Line

New employees behind the lapse of grant of 60% arrears.....

Employees who mustered into Central Government establishments after 1.1.2004 has ten percent of their salary (Basic Pay + Dearness Allowance + Dearness Pay) deducted as result of their induction into the New Pension Scheme.

Bearing no knowledge of this New Pension Scheme and having five years rolled by, beginning of this year the government has brought into issue an application form. Requesting PRAN (Permanent Retirement Account Number) number in this application, it has questioned to what scheme (Scheme ‘A’, ‘B’, and ‘C’) and percentage should their savings be invested.

With no whereabouts of any knowledge of this question in their mind they have given filled up application on their part. Some instead of returning the application filled up, they have kept it themselves. Moreover the Government by itself has not taken any steps regarding this.

By the instance, the Government has given equal amount to the deducted amount as by the New Pension Scheme. The doubled amount along with the interest has been given as statements to them. Last year 40% arrears have also been disbursed.

Everyone has been taken aback by shock by the Government decision in the scenario of expectation of the remaining of 60% arrears.

Having not singed the New Pension Scheme registration form the Government has announced that their (Employees appointed on or after 1.1.2004) 60% arrears would not be granted.

FILLED WITH DREAMS AND FASCINATIONS THIS ORDER HAS STRUCK DOWN UPON AS THUNDER THEM..!

WHO HOLD THE RESPONSIBILITY FOR THIS…!

Have a look page No.3 of PRAN application

Source: CG Staff News

PFRDA sees ally in post offices to offer NPS services

Post offices will soon offer services under the new pension system as the department of posts is set to sign an agreement with the Pension Fund Regulatory and Development Authority (PFRDA) in this regard. Initially, the services will be available only in computerised post offices, an official in the ministry of communications & IT said.

After the agreement, the postal department will act as an agency to enrol NPS customers, the official said requesting anonymity. Technically known as ‘points of presence’ (PoPs), these agencies serve as contact and collection centres where pension contributions are collected under the NPS scheme. There are 21 PoPs providing NPS services including banks such as State Bank of India, Axis Bank, ICICI Bank, Oriental Bank of Union Bank of India.

The pension regulator is now convinced that some of the post offices have the IT infrastructure to serve the scheme.

Earlier, the watchdog had expressed doubt due to the poor IT penetration in the postal system, post offices may not be able to provide NPS services. “But around 3,000 post offices were found to be fully equipped,” the official said. The official didn’t specify the time frame within which the agreement will be signed. The PFRDA opened up the new pension system to all citizens from May 1, 2009. It is compulsory for all government employees joining service on or after January 1, 2004.

Under the new pension system, instead of agents selling the scheme, the regulator has banks and other financial institutions as points of presence, where an account could be opened. As a result, the marketing cost of the pension plan remains low and the fees applicable are disclosed upfront. The scheme offers a social security net for workers in the unorganised sector too.

The regulator is now in talks with the government to bear the transaction cost for the unorganised sector, which would make the scheme even more attractive.
Source: The Economic Times

All India Defence Employees Federation - Kelkar Committee

All India Defence Employees Federation (AIDEF)

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THE 4.5 lakh defence civilian employees have decided to join the countrywide strike of the working class on September 29. They have also decided to fight against the retrograde recommendations of the Kelkar committee.

This was decided in the national executive committee meeting of the All India Defence Employees Federation (AIDEF) held on July 13-14, 2005. The Kelkar committee has recommended corporatisation of the 39 Ordnance factories in the country, which are at present under the direct control of the government of India, with the ultimate intention of privatisation.

The AIDEF has decided to launch persistent struggle demanding for the rejection of the report by the government of India. The AIDEF has directed its 367 affiliated unions to stage massive demonstrations against the Kelkar committee report on August 24, 2005 and also to burn the copies of the report.

The AIDEF has endorsed all the decisions taken in the National Convention of Trade Unions held on July 9, 2005 at New Delhi. The 4.5 lakh defence civilian employees will participate in the September 29 strike. The strike ballot will be taken by the affiliated unions on September 12 and the strike notice will be served on September 15, 2005.

The AIDEF has also opposed the New Contributory Pension Scheme and has decided to stage protest demonstrations on the day when the PFRDA bill is placed for voting in the parliament.

New pension rules with better pay panel package

New pension rules with better pay panel package

This should cheer former central government employees. With the Centre notifying the new pension rules, they can expect a higher pension packet from next month. The revised pensions are higher than what the sixth Pay Commission recommended.

Although the move benefits the cross-section of retired employees, those in higher brackets have gained more in real terms. New pensions for defence and railway personnel will be notified separately.

Older pensioners have an added reason to rejoice. Centenarians will get 100% extra pension calculated at revised rates. Similarly, those over 80 years will get an additional 20% of their basic pension. This goes up by 30%, 40% and 50% for those over 85, 90 and 95, respectively.

To get an idea of the quantum of hike, a person with a basic pension of Rs 10,000 — who used to get Rs 22,050 in hand — will now receive a total pension of Rs 26,216. The new rates are effective from January 2006 and the arrears will be given out in two instalments — 40% during the current fiscal, 60% in 2009-10 . The maximum gratuity too has been revised to Rs 10 lakh, up from the earlier Rs 3.5 lakh. If an employee dies during service, his family will now get full pension (enhanced family pension) for 10 years.

The new rules also add more flexibility in retirement benefits. For instance, those who are due to retire can now get 40% of their pension commuted and get a lump sum amount in turn.

GOLDEN SMILES

Minimum pension Rs 4,060, up from earlier Rs 2,813 in hand (revised pension to be effective from Jan 1, '06).

Maximum pension Rs 52,200, up from Rs 33,075.

Maximum gratuity up to Rs 10 lakh (depending on years of service and last salary drawn).

Enhanced family pension, for employees dying in service, to be full pension for 10 years.

Employees eligible for full pension if service is for 20 years.

Incremental additional pension for those 80 years and above. People over 100 to get double pension.

(Courtesy: Timesofindia.com )