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5 operational changes that make investing in NPS easier
Posted by : Anonymous on Oct 26,2017 02:21 PM
The Pension Fund Regulatory and Development Authority (PFRDA) has been taking various initiatives from time to time to simplify and improve operational issues with National Pension System (NPS), a retirement-focussed investment product.
The initiatives taken by PFRDA benefits both existing subscribers of NPS and new ones. Before we tell you about some of the changes introduced by PFRDA in NPS, here is a little bit about the product.
Structure of NPS
Under NPS, an investor can open two accounts: Tier I and Tier II. Tier I account is a non-withdrawable, permanent retirement account whereas Tier II is a voluntary, withdrawable account. And a tier II account can be opened only when you have an active Tier I account.
An investor in NPS has two choices to invest in, namely auto choice and active choice. In the auto choice, the allocation among assets is done as per a predetermined formula based on the age of the investor. The allocation among assets is done as per a predetermined formula based on the age of the investor. The allocation is made in 3 asset classes, i.e., equities, corporate bonds, and government securities. Under the active choice, the choice of allocation lies with the investor. There is, however, a cap of 50% for investment in equity.
Now, here are five major operational changes brought about in the functionality of NPS.
I. Freezing of NPS account
The minimum annual (April-March) contribution for an NPS Tier-1 account to remain active has been reduced from Rs 6,000 to Rs 1,000. If the minimum annual contribution is not made, the account was made inactive by freezing it.
In the NPS Tier-1 account, the earlier requirement of maintaining a minimum balance of Rs 2,000 at the end of the financial year and contribution of at least Rs 250 per financial year has been waived off.
Subscriber account would be unfrozen when a minimum contribution of Rs. 500 is made during a fiscal. The subscriber would be allowed to contribute through the normal process, i.e., through any POP (point of purchase) or through eNPS.
II. Seeding of Aadhaar with NPS (PRAN)
There are 3 ways to seed Aadhaar with PRAN - Permanent Retirement Account Number.
• Online by accessing the www.npstrust.org.in website
• Offline by filling a form
• Accessing the CRA ( Central Recordkeeping Agency) section using the NPS mobile app
Here is how to link Aadhaar to your PRAN online: After logging-in to the NPS account through the eNPS portal (www.npstrust.org.in ) ) or through the NPS mobile app, once the Aadhaar number is submitted, you will get an OTP. After authentication using that OTP, Aadhaar will be linked to your PRAN.
III. Scheme preference change
NPS allows subscribers to choose the pension fund schemes where they would like to invest in as well as the pension fund manager (PFM) who will manage their money. The subscribers (other than government) are allowed to change PFM once, and their investment option (active or auto choice) and scheme preference twice in a financial year.
IV. Interoperability between CRAs
A Central Record Keeping Agency (CRA) is responsible for recordkeeping, administration and customer service functions for all NPS subscribers. Earlier, NSDL e-Governance Infrastructure was the only CRA for NPS subscribers, but now PFRDA has appointed Karvy Computershare. Subscribers of NPS will now have an option to choose NSDL or Karvy as the CRA to open an account. Existing subscribers can also select the CRA of their choice, once in a year.
V. NPS mobile app
Four major functionalities have been introduced in the app:
Tier II withdrawal:
A subscribers can now initiate Tier II account withdrawals under NPS using the mobile app where the funds will get transferred to their bank account registered with the CRA of their choice.
Contribute without logging in:
You can download the NPS mobile app from the Android Play Store. In the mobile app, the subscriber has an option to make contributions without logging into the app, instead, it will be routed through a captcha code and an OTP. What one needs is their PRAN to make payments.
PRAN saving option:
"Remember PRAN" in the app has been enabled. Now, subscribers need not enter the12-digit number every time they login.
Reset password using OTP :
Subscribers can now reset the password using the app through an OTP. This option is in addition to the option of resetting the password using a secret question.
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