What is Gold ETF?

India is the largest consumer of gold in the world. 10 grams of gold was Rs. 88 in 1947 and now 2013 it is around Rs. 33000. From 1947 to 2013 gold has given an average annual returns of approximately 10%. Gold is one of the important asset classes. Traditionally people used to buy physical gold, but now a new avenue has opened in the form of gold ETF.....

National Pension System

How do we get ready to face a situation when the regular income stops? We can’t start thinking about it when we are just about to retire. India has over a billion population. People are living longer due to advancement in healthcare sector. The money invested in Fixed Deposits will not be able to beat the inflation. They have no social security like other developed countries. 88% of the working people are not covered by any pension plan! Here is your chance to get yourself covered.

What is NPS ( National Pension System? )
What is the structure of it?
What are the features of NPS?
Pension Fund Managers
Locations where you can open NPS a/c
How is it compared to PPF?
How do I join NPS?


What is NPS ( National Pension System )?

This is a scheme to get adequate income i.e. pension in old age so that life after retirement is sound and secured. It is investing part of the income regularly for retirement. After retirement one gets some fixed income regularly and part of the accumulated money in lump sum.

The National Pension System is made available to all the citizens of India by the Govt of India from May 2009. Earlier it was available only to central Govt employees. Now it is open to all the Indian citizens. The launching of this scheme by Govt of India through PFRDA (The Pension Fund Regulatory Development Authority ) is a welcome step. It is offered on a voluntary basis.


What is the structure of it?

There are 2 types of a/cs basically one can open.

1.Tier 1 a/c – This is a non-withdrawal a/c

2.Tier 2 a/c – This is a withdrawal a/c

To open Tier 2 a/c one has to open Tier 1 a/c first. After one opens an a/c he/she will be given a Permanent Retirement Account Number (PRAN).


What are the features of NPS?

1. Subscribers will be offered investment choices. Subscriber has the flexibility to mix and match the portofolio. It can be a combination of

E-Equities

C-Fixed deposits of banks, liquid schemes of mutual funds, corporate bonds

G-Central and state Govt bonds


2. The subscriber can choose what combination of portfolio he/she wants to have. The investment structure varies depending on the age of the a/c holder. They can opt for auto choice in case they can't decide their portfolio by themselves. In that case half of the investments of subscribers up to an age of 35 years will go into equities, one-fifth into central and state government bonds, and the rest into corporate bonds and select other instruments, including fixed deposits. These investments will be gradually adjusted every year. At the age of 60, only one-tenth remains in equities, another one-tenth in corporate bonds and 80% in central and state government bonds.


3. The subscribers will also get to choose from 6 different fund managers chosen for this scheme by PFRDA.


4. The pension fund managers (PFMs) and central record keeping agency (CRA) will give the past performance of the funds and NAVs of different schemes so that subscribers can make informed decisions on which scheme to choose.


5. The subscriber can exit from the NPS on or after 60 years. At the time of exit 40% of the accumulated money will be invested to purchase an annuity and the remaining 60% will be given back lump-sum. If the subscriber decides to exit before the age of 60, 80% of the accumulated money will be invested in annuity and only 20% will be given back as lump-sum.


6. The assets in Tier II a/c will be managed in the same way as Tier I a/c. The money accumulated in this a/c can be withdrawn anytime.


7. NPS charges .0009%. It is cost effective and maintenance and transaction are minimal.


8. It gives the advantage of power of compounding.

9. The investments move along with you in case of change of job. There is no hassle of transferring.


Pension Fund Managers

PFRDA has been chosen the following 6 fund managers for this scheme.
1. LIC Pension Fund Limited

2. SBI Pension Funds Pvt. Limited

3. IDFC Pension Fund Management Co. Limited

4. Kotak Mahindra Pension Fund Limited

5. ICICI Prudential Pension Funds Management Co. Limited

6. Reliance Capital Pension Fund Limited


Locations where you can open NPS a/c

People can open an NPS a/c in any of the POP ( Points of Presence ).

You can find the POP locations here.


How is it compared to Public Provident Fund/PPF?

The main difference is PPF a/c gives fixed returns where as NPS returns depend partly on the market performance.


Steps to join NPS.