Major flaw in New Pension Scheme still exists after budget 2015, Please read this news paper report:-
Showing posts with label NPS. Show all posts
Showing posts with label NPS. Show all posts
Friday, March 27, 2015
Friday, March 27, 2015
Major flaw in New Pension Scheme still exists after budget 2015
Tuesday, March 24, 2015
Tuesday, March 24, 2015
NPS is well-framed but badly-marketed product: Yogesh Agarwal, PFRDA
In a chat with Mythili
Bhusnurmath of ET Now, Yogesh Agarwal, Former Chairman, PFRDA, shares his views
on what ails the National Pension Scheme. Excerpts:Mythili Bhusnurmath: Why is that the NPS has got such little salience with the public at large? Apart from government employees who had no option, the offtake has not been as good as one would have anticipated?
Yogesh Agarwal:
Largely, one issue has to be sorted out with the government. This is the most
sophisticated and modern product that we have come up with. The world over
wherever I have travelled, they have said that NPS is one of the most
beautifully-designed schemes, but the problem comes with the marketing of the
scheme, the problem is that with the taxation of the scheme the Government of
India in its own wisdom has decided to accord. This is the only pension product
or the social security product which is taxed at maturity. All other competing
products, including EPS and PPF, are EEE.
So, when people come
to know that whatever they are going to save for their pension, one-third of it
is going to be taken away at their retirement age when they need it the most,
people are not willing to come forward. When we talked to the corporates,
everybody said it is a beautiful product, you get the tax treatment on par with
the other products, "we will just flock in and we have been raising this
with the government and they have been promising us a level playing
field." If you are going to tax the NPS when a person retires at 60, most
of these people will be in the 30% tax bracket. Maybe till one month before
retirement he will be not in the taxable bracket, but on retirement the corpus
will run into lakhs and that will be taxable at 30%. That is the problem which
is coming up with the NPS.
Read more at:
Monday, March 9, 2015
Monday, March 09, 2015
Is NPS better than EPF?
The NPS is more complicated than EPF, but it may ensure a sufficient retirement kitty
If there’s one investment option that has received generous tax breaks in the Budget, it is the National Pension System (NPS). In a watershed move, the Finance Minister has also announced that employees in the organised sector will now be able to opt out of contributions to the Employees Provident Fund (EPF) and invest in the NPS instead. So, if given this choice, what should you do? Here’s how they compare.
Contributions
EPF contributions are mandatory for employees earning up to ?15,000 a month in the organized sector. Many employers however insist on EPF contributions for all their employees. The contribution is pegged at 12 per cent of your pay (basic plus dearness allowance). Your statutory EPF contributions are matched by your employer. If you are an employee who usually struggles to save, the EPF is a good option for you as it forces you to save at least 12 per cent of your pay.
But if you are targeting a comfortable retirement, note that EPF alone won’t be enough as it is pegged only to your basic pay. The NPS is a voluntary account; you can contribute anything starting from ?500 a month (?6,000 a year).
To avail of the tax breaks on the investment, the maximum limit is ?2 lakh a year. Unlike the EPF, the NPS allows you to skip contributions for a few months if you can’t afford it (investing once a year is mandatory).
So, the NPS scores over the EPF on two counts — you can save much more and do it with greater flexibility. But currently all your EPF contributions are matched by your employer. Not so for the NPS.
Portfolio
The money you pay into EPF is invested in ultra-safe options — Central and State Government securities, bonds and deposits from PSUs and a special deposit scheme from the Government. Last we know, G-Secs made up 40 per cent of the portfolio, PSU debt 32 per cent, with the deposit making up the rest of the EPF kitty. The EPF doesn’t actively manage its portfolio — it mostly buys and holds till maturity. This makes for low but predictable returns.
The key differentiator with the NPS is that it allows you to add an equity component to your retirement kitty. You also get to flexibly allocate your money between equities (up to 50 per cent), liquid funds/bonds and Government Securities (G-Sec) in any proportion you like.
You also have the choice of deciding who, among the six pension fund managers, will manage your money. Their individual track records are available on their websites.
You can rejig allocations once a year and also change your fund manager. Both the equity and the debt portions of the NPS have delivered double-digit returns in the last one year. But because they are invested in market instruments, your returns will fluctuate from year to year.
The G-Sec portion, for instance, delivered negative returns during the rising rate scenario, but is faring well with falling rates. Given that you are looking at the NPS as a long-term option, you need not worry too much about shorter term losses in the debt portfolio. Due to its portfolio structure, the NPS is likely to earn higher returns but with greater variability.
Returns
The interest you earn on your EPF account is decided by the EPF trustees who announce the rate every year. In the last four years, interest rates have been 9.5, 8.25, 8.5 and 8.75 per cent, respectively.
The returns on NPS depend on your asset allocation as well as choice of fund manager. If you choose a 30-50 per cent equity component, returns are likely to be in the double-digits, even assuming equities manage only 15 per cent a year and debt securities 8 per cent.
Disclosures
The EPF’s portfolio is not made public. But it is a government-backed scheme and the presumption is that it will not default on any payments. Returns are also announced and well-publicised.
With the NPS, you know exactly where it invests, with all the managers regularly disclosing their portfolios. But unlike the EPF, gauging NPS returns is not easy. Returns earned by different plans/managers are not available at one location. You need to compile them individually from the historical NAVs put out by the different fund managers.
So, the EPS is your best bet if you like to know exactly what you’re earning. The NPS works if you don’t mind leaving it to market forces.
Liquidity
The EPF allows you to withdraw your money before retirement if you resign from one job and take up another, after a gap. You can also draw money from it for constructing/buying a home, illness, marriage or education of children. You can use the sums withdrawn for these purposes.
In the NPS, if you withdraw before the age of 60, you need to compulsorily use 80 per cent of the proceeds to buy an annuity plan from an insurer. Even withdrawals after the age of 60 require you to use 40 per cent to buy an annuity. Only 60 per cent will be available to you to deploy as you please.
The EPF is certainly more flexible than NPS on early withdrawals. But withdrawing too much or too often can leave you short of a retirement kitty when you most need it.
Taxability
Contributions to the EPF are tax-free under Section 80C. Interest earned and withdrawals aren’t taxed either, unless you do so within five years of starting the account.
Investments in the NPS, up to ?2 lakh are tax-free. But the sums you withdraw at retirement are taxable at the prevailing income tax rates.
Source:www.thehindubusinessline.com
Saturday, March 7, 2015
Saturday, March 07, 2015
Atal Pension Yojna to replace NPS from June 2015
Atal Pension Yojna to replace NPS from June 2015, Please read this news paper report:-
Friday, February 27, 2015
Friday, February 27, 2015
Simplification of Withdrawal process in NPS – Documentary requirements relaxed – No need for submitting Legal-Heir Certificate if nomination is available on record
PENSION FUND REGULATORY AND DEVELOPMENT
AUTHORITY
PFRDA/2015/07/EXIT/02
25 th February, 2015
To,
All Govt depts./PAO’s/PrAO’S/DDO’S/DTO’S &
CRA
Dear Sir/ Madam,
SUB: Simplification of Withdrawal process –
Documentary requirements
Currently, the following documents are
required to be submitted by the subscribers for processing a withdrawal request
by CRA / NPS Trust for various types of withdrawals and which are common across
all the sectors of National Pension System.
1. Original PRAN Card or In the absence of
PRAN card, notarized affidavit
2. Photo ID proof*
3. Address proof of the Claimant*
4. Cancelled cheque (containing claimant’s
Name, Bank Account Number and IFS Code) or Bank Certificate
* If a document contains both identification
and address for compliance with KYC requirements, it would be sufficient for
processing the withdrawals. Ex: Passport,Aadhar, Driving license, Ration
card etc.
Additionally, the following documents are
asked for exits arising out of death of the subscriber
5. Death certificate in original issued by
local authorities
6. Legal Heir Certificate/Succession
Certificate as applicable in case if nominationis not registered by
the subscriber
However, feedback has been received at various
meetings conducted by PFRDA with Government officials, subscribers and other
stakeholders that the burden of documentation is too heavy and needs to be
reduced for a smooth operation of the system. The Authority based on the
feedback and also upon reexamination of the procedural requirements at various
levels and has decided to simplify the documentary requirements for the
Government subscriber sector to begin with. However, the long run
goal is to minimise the documentary requirements for all sectors.
The following are the revised requirements
for the Government sector subscriber for the Exit and withdrawal
requests submitted to CRA / NPS Trust:
1. KYC documents, Bank Passbook/cancelled
cheque/bank certificate and Name mis-match certification: The
certification provided by the PAO/PrAO/DDO/DTO that
- the
KYC requirements of proper identification of the subscriber has
been done (as per Annexure I)
- that
the name as provided in the withdrawal application form be
accepted as final.
- Bank
account details as provided in the application form be accepted
as final.
Would be accepted and claims dealt
accordingly.
2. Nomination – If already existing in
CRA system – there is no further requirement to fill in the details,
unless the subscriber wishes to change the nomination already
provided
3. Original PRAN card or In the absence
of PRAN card, notarized affidavit: Not required to be submitted
henceforth.
4. Death certificate – Copy of the
death certificate duly attested by the concerned PAO/PrAO/DDO/DTO with a
specific certification that it is a true copy of the original death certificate
and such certificate shall be dated and subscribed by such officer with his
name, title and seal of office would be accepted as adequate for the purpose of
establishing the death of the subscriber.
Yours faithfully,
Sd/-
Venkateswarlu Peri
General Manager
Venkateswarlu Peri
General Manager
ANNEXURE I
1. KYC CERTIFICATION
Certified that Shri/Smt …………. Son/Wife of Shri
…………………, who is an employee of (office address) ……………. from (date) ……. and is
at present holding the post of ……………….. and his/her identity is certified as
provided in the NPS withdrawal application form along with the
address as provided.
Further, the name and Bank account details as provided in the withdrawal application form by the subscriber shall be accepted as final.
Further, the name and Bank account details as provided in the withdrawal application form by the subscriber shall be accepted as final.
Date ……………..
Name, Designation, Address & Tel
No Of the certifying officer
Tuesday, February 24, 2015
Tuesday, February 24, 2015
New Website of National Pension System Trust Launched: www.npstrust.org.in
Press Information Bureau
Government of India
Ministry of Finance
Government of India
Ministry of Finance
23-February-2015
New Website of National Pension System Trust Launched; To Provide
Proper and Effective Information Dissemination to the Stakeholders and Provide
Ease of Access to Various Beneficiaries Under NPS
The National Pension System Trust has been
set-up and constituted by Pension Fund Regulatory Development Authority (PFRDA)
for taking care of the assets and funds under the National Pension System (NPS)
in the interest of the beneficiaries (subscribers).
The National Pension System Trust has launched
its new website www.npstrust.org.in here today.. The website was launched by
Shri G. N. Bajpai, Chairman & Trustee of the Board of NPS Trust. The
website is aimed to provide proper and effective information dissemination to
the stakeholders and provide ease of access to various beneficiaries under NPS.
Wednesday, January 14, 2015
Wednesday, January 14, 2015
Analysis of NPS Returns for Government Employees – National Pension System for Central Government Employees and State Govt Employees
Average NPS Returns since launch of NPS for
Central Government Employees is 10.35 % which is rougly 1.5% to 2% higher than
Interest allowed in General Provident Fund meant for Cental Government
Employees during this period.
Economic Times reports as follows on NPS
Returns
NPS schemes for the general public have done
well due to the recent equity and bond rallies
They reached late, but NPS (National Pension System) investors have finally joined the party in the capital markets. An analysis by ET shows that NPS schemes have generated better returns than the provident fund.
They reached late, but NPS (National Pension System) investors have finally joined the party in the capital markets. An analysis by ET shows that NPS schemes have generated better returns than the provident fund.
The average NPS fund for Central government
workers has given 10.35% returns since launch, while the average state
government scheme has delivered 10.84%.The NPS schemes for the general public
have also done very well, thanks to the bullishness in the equity markets and
the recent rally in bonds.
The average equity fund has generated 14.6%,
while the corporate bond fund has given 10.6%. Gilt funds have given average returns
of 9.9%. These calculations are based on SIP returns on monthly contributions
from inception till December 2014.
The high returns should be music to the ears
of the estimated 36 lakh government employees (14 lakh central government and
22 lakh state government) who have nearly ` . 53,500 crore invested in NPS.
Three pension funds manage this gigantic corpus, which is almost 92% of the
assets under management (AUM) of the NPS.
But the higher returns have been accompanied
by greater volatility. The NPS funds did very well in 2012-13, but gave
pathetic returns in the following year.
As bond yields shot up in 2013-14, the SIP
returns of the average Central government fund was 5.4% while the average state
government fund grew only 4.9%. The 18% returns from equities that year didn’t
help much as these funds had only a small portion of their corpus in stocks.
|
Average Returns in (%)
|
||
|
Year
|
Central Govt NPS
|
State Govt NPS
|
|
2012-13
|
9.76
|
11.82
|
|
2013-14
|
5.37
|
4.96
|
|
2014-15
(Up to Dec)
|
19.63
|
20.08
|
|
From Launch of NPS
|
10.35
|
10.84
|
The Pension Fund Regulatory and Development
Authority (PFRDA) allows NPS managers to invest up to 15% in equities, but no
pension fund manager has ever hit that ceiling. As on November 30, 2014, the
central government scheme of UTI Retirement Solu tions had only 11.48% in
stocks, while the fund managed by SBI Pension Fund had allocated only 8.25% to
equities.
“The unsaid benchmark use for the central
government NPS is the EPFO rate of return. Therefore, PF managers keep a lower
allocation to stocks. But this compromises the long-term return potential of
the scheme. They should ideally increase the exposure to equity ,“ says Manoj
Nagpal, head of mar keting and business development at Zyfin Advisors and
founder CEO of Outlook Asia Capital.
Despite the conservative allocation, NPS funds
have given good returns in the first nine months of 2014-15. This is due to the
bond rally in 2014. The 10-year benchmark bond yield fell 135 basis points —
from 9.1% in April 2014 to around 7.8% by the end of 2014 — pumping adrenaline
into the NAVs of funds overweight on government bonds. The average SIP return
of the gilt funds in 2014-15 is close to 22%, better than the 20% delivered by
the equity funds in the period.
In the NPS segment for the private sector, the
E class (equity) funds have done well with average SIP returns of 14.6% since
the scheme was thrown open to the public in May 2009. ET looked at the returns
of four types of investors in the past three fiscals and since launch (see
table).
Interestingly, ICICI Prudential Pension Fund
has been the best performing pension fund for all four investor types. Kotak
Pension Fund and SBI Pension Fund are tied for the second position.
Source: The
Economic Times
