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Know About Pension Plan Benefits According to the Bank

In order to ensure living security at the old age, particularly for those who are in unorganized sector not protected by welfare programmes like Employees’ Provident Fund Scheme and similar measure available for those working in the organized sector, the Government of India has introduced a Pension programme under the nomenclature NPS, that is National Pension System.

This programme encourages every citizen of the country to voluntarily enroll in a savings scheme with restricted withdrawal option, which will be managed by fund managers called Aggregators using the funds in value driven investments, ultimately to make the funds available to the individuals at their retirement time to provide resource to their livelihood.

NPS launched as a compulsory scheme in 2003 for fresh entrants to central Government employment, with the exception of Army Personnel, was progressively extended to cover those employed in unorganized sector, offering a number of advantages of pension plans.

Main features of NPS

The following are the main features of the New Pension System:

  1. A pension corpus is created through contributions to the Voluntary Savings Scheme, which offer scope to provide annuities leading to the advantages of pension plans.
  2. The contributions made to this corpus fund are given tax exemption under Income tax law, under its sections 80CCD and 80CCE.
  3. The System offers options to the investing individual to choose the asset allocation pattern, to be distributed among Equities, Corporate Bonds and Government Securities, while 50% exposure is designed for Exposure to Equities, giving better returns.
  4. The contributing individual can get the funds back after attaining the age of 60, while 40% of it will be used for annuity payments for the rest of the life. In the case of earlier withdrawals, 80% of the funds will be employed for Annuity purchases.
  5. Portability is the valuable feature of NPS and the fund continues to be alive and growing even when the Investor changes job position.

How NPS Operates

The individual who volunteers for the scheme has to complete a form of registration and submit it to the Pension Fund Manager, who will process for supplying a PRAN, which is Permanent Retirement Account Number. The Fund managers accept contributions at a minimum of Rs 100 on registration and afterwards any amount during the course of the year, at any point of time.

Among the advantages of pension plans, Schemes such as NPS Swalaman Yojana introduced by the Government offering a subsidy of Rs 1000 per account for 5 years for those who open accounts with Rs 1000 to Rs 12000 are praiseworthy.

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