Welcome to the “National Pension System” NPS – Pension nahi yeh Pran Hai 1 ‘NPS’ - Pension nahi yeh Pran hai

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  • Slide 1
  • Welcome to the National Pension System NPS Pension nahi yeh Pran Hai 1 NPS - Pension nahi yeh Pran hai
  • Slide 2
  • Agenda 2 Understanding NPS. What is NPS ? How does it work ? Why should I invest in NPS ? How is it superior to other Retirement Plans ? Tax treatment on Contribution, Accretion & Maturity under NPS. NPS Report Card 1. Assets Under Management 2. Fund Performance as on 31/03/2015 NPS NPS - Pension nahi yeh Pran hai
  • Slide 3
  • About NPS 3 NPS is a Government of India initiative with an objective of Development of a sustainable and efficient voluntary defined contribution Pension System in India. It is regulated by PFRDA. NPS provides a platform for savings through three baskets of Investment Equity (E), Corporate Bonds (C) and Govt. Securities (G) to create a Retirement Corpus (Pension Wealth), to enable subscriber for purchasing Annuity post retirement. It also allows for withdrawal of up to 60% of the Retirement Corpus post retirement. The withdrawal can be spread over 10 Years post Retirement age. It is open for all citizens of India (Resident/Non Resident) who are between 18-60 years of age. NPS - Pension nahi yeh Pran hai
  • Slide 4
  • NPS - Architecture Main Components of the NPS Architecture are : 1.Points of Presence (PoPs) The first single contact point. It is the interface between the subscribers and the NPS Architecture. Responsible for disseminating all the information about NPS.Points of Presence (PoPs) 2.Central Recordkeeping Agency (CRA) -( at present NSDL) 3.Pension Fund Managers ( at present 8 PFMs)Pension Fund Managers 4.Custodian (SHCIL) 5.Trustee Banker (Axis Bank Ltd.) 6.Annuity Service Providers - (at present 7 annuity providers)Annuity Service Providers It has an unbundled Architecture. Ownership of the Product does not lie with any single entity 4
  • Slide 5
  • NPS Architecture CRA (NSDL) CRA (NSDL) Subscribers Custodian (SHCIL) Custodian (SHCIL) NPS Trust Annuity Service Providers PFMs PFRDA Online POP Information Flow Fund Flow Trustee Bank Axis Bank Ltd. Trustee Bank Axis Bank Ltd. 5
  • Slide 6
  • Why should I invest in NPS? Additional Tax Deduction: Opportunity of Extra Tax Savings under Sec 80 CCD (1B) up to Rs.50000/- ( This is applicable for investments in NPS only) and is over and above the Sec 80C limit. Lower Expense Ratio : NPS is perhaps the worlds lowest cost pension scheme. The total recurring expenses inclusive of the Fund Management fee and all other handling and administrative charges would work out to be around 0.05% to 0.21% p.a. The Lower Expense ratio would lead to HIGHER RETIREMENT CORPUS. Ensures Complete Portability: NPS account can be operated from anywhere in the country irrespective of employment and geography. Tax Efficient : The Retirement Corpus used for buying Annuity will be totally Taxfree. No liquidity before Retirement: Under Normal circumstances, No withdrawal is allowed before Retirement i.e. 60 Years of age. In a true sense this investment will prove to be the "REAL BUDHAPE KI LATHI". Flexibility: Subscribers have - i) Choice of Pension Fund managers (PFMs) ii) Choice of Investment mix iii) Choice of Life Cycle Fund is also available I have a freedom to change the PFM or the Investment Mix once a year without any exit load. 6
  • Slide 7
  • Public Provident Fund (PPF) Mutual Fund Pension Schemes Pension Plans from Insurance Companies Small Savings Scheme (Post Office Investments) Other customized Individual Products Is there any other good option available? 7 Popular Retirement Tools NPS - Pension nahi yeh Pran hai
  • Slide 8
  • How is it superior to other perceived Retirement Plans ? 8 Parametres NPS MF Pension Products Insurance Pension Products PPF Postal Savings Tax Rebate Additional Tax Savings under Sec 80 CCD (1B) which is beyond the Sec 80 C Limit Only under Sec 80 C Limit Only under Sec 80 C Limit Only under Sec 80 C Limit Only under Sec 80 C Limit Expense Ratio Ranges between 0.15% to 0.25% Ranges between 2% to 2.50% Ranges over 2.50% Government Administered Returns Market Linked Assured (Depends upon 10 Year G SEC current yield) Assured Asset Allocation Subscribers can customize based on their Risk appetite. Also change once a Year without any exit load Based on Inestment Objective of the Scheme. Investors can not customize it. Government Administered Liquidity No liquidity before Retirement Age Liquidity available subject to exit load Liquidity available subject to huge exit load Liquidity not before 7th Year Not Available Tax Treatment on Maturity The amount used for purchasing Annuity - TAXFREE The Amount withdrawn as lumpsum - TAXABLE LTCG on Schemes where Equity Component 65% Maturity Amount TAXFREE Maturity Amount TAXABLE Fund Managers Can be Changed once a Year without any exit load Can not be Changed N/A
  • Slide 9
  • NPS Taxability 9 EventTaxability Contribution in Tier-I Account Additional deduction of Rs.50,000/- under Sec 80 CCD(1B) available in excess of Rs.1,50,000/- under Sec 80 C Accretion in Tier-I Exempt Withdrawal from Tier-I (including accretions) 1. Amount used to purchase annuity is exempt. 2. Amount withdrawn as lump sum is taxable. Currently NPS follows E-E-T regime of taxation. Under DTC it is proposed to be under EEE. NPS - Pension nahi yeh Pran hai
  • Slide 10
  • Effect of Lower Expense Ratio on Retirement Corpus a comparison (Assumption : Rs.8000/- being invested Quarterly with assumed gross return of 10% ) 10 NPS - Pension nahi yeh Pran hai Under NPS The % Difference Age Investment for No of Years Assumed Gross Return % Expense Ratio % Net Return % Investment made in total Retirement Corpus at 60 2040100.0559.94512,80,0001,64,46,955.36+ 77.04 2535100.0609.94011,20,00099,23,439.19+ 62.19 30 100.0709.9309,60,00059,33,225.54+ 48.92 3525100.0809.9208,00,00034,99,334.01+ 37.35 4020100.1009.9006,40,00020,10,659.71+ 27.16 4515100.1359.8654,80,00011,01,406.69+ 18.35 5010 0.2059.7953,20,0005,46,186.77+ 10.82 Under other Investment Schemes (Expense ratio 2% assumed) Age Investment for No of Years Assumed Gross Return % Expense Ratio % Net Return % Investment made in total Retirement Corpus at 60 2040102.0008.00012,80,00092,90,122.04 2535102.0008.00011,20,00061,18,558.11 30 102.0008.0009,60,00039,84,186.51 3525102.0008.0008,00,00025,47,815.61 4020102.0008.0006,40,00015,81,179.17 4515102.0008.0004,80,0009,30,660.56 5010 2.0008.0003,20,0004,92,880.18
  • Slide 11
  • Effect of Lower Expense Ratio on Retirement Corpus a comparison (Assumption : Rs.8000/- being invested monthly with assumed gross return of 10% ) 11 NPS - Pension nahi yeh Pran hai Under NPS The % Difference AgeInvestment for No of Years Assumed Gross Return % Expense Ratio % Net Return % Investment made in total Retirement Corpus at 60 2040100.0559.94538,40,0004,40,80,760+69.97 2535100.0609.94033,60,0002,70,23,703+ 56.65 30 100.0709.93028,80,0001,64,09,728+ 44.70 3525100.0809.92024,00,000 98,22,480+ 34.21 4020100.1009.90019,20,000 57,23,667+ 24.94 4515100.1359.86514,40,000 31,76,640+ 16.86 5010 0.2059.795 9,60,000 15,94,268+ 9.92 Under Other Investment Schemes (Expense ratio 2% assumed) Age Investment for No of Years Assumed Gross Return % Expense Ratio % Net Return % Investment made in total Retirement Corpus at 60 2040102.0008.00038,40,0002,59,34,431 2535102.0008.00033,60,0001,72,50,823 30 102.0008.00028,80,0001,13,40,906 3525102.0008.00024,00,000 73,18,715 4020102.0008.00019,20,000 45,81,280 4515102.0008.00014,40,000 27,18,228 5010 2.0008.000 9,60,000 14,50,266
  • Slide 12
  • 12 Starting Age Total Amount Invested Assumed Rate of Return Retirement Corpus at Age 60 Assumed Rate of Return Retirement Corpus at Age 60 Assumed Rate of Return Retirement Corpus at Age 60 1834600010%869619211%1231662412%17452471 1934000010%789962911%1109005812%15576563 2033400010%717548111%998504312%13901646 2132800010%651716411%898953412%12406184 2232200010%591869411%809268012%11070950 2331600010%537463211%728470212%9878776 2431000010%488002911%655679512%8814336 2530400010%443039011%590102212%7863943 Starting Age Total Amount Invested Assumed Rate of Return Retirement Corpus at Age 60 Assumed Rate of Return Retirement Corpus at Age 60 Assumed Rate of Return Retirement Corpus at Age 60 18420000010%5914007011%7980654712%108008262 19410000010%5366369911%7179779012%96335948 20400000010%4868518111%6458269312%85914239 21390000010%4415925611%5808260712%76609142 22380000010%4004477811%5222667312%68301020 23370000010%3630434311%4695105612%60883053 24360000010%3290394911%4219824912%54259869 25350000010%2981268111%3791644112%48346312
  • Slide 13
  • NPS Report Card 1.Assets Under Management 2.Fund Performance as on 31/03/2015 13
  • Slide 14
  • Where do we Stand now in terms of AUM? 14 Total AUM Details as on 31/03/2015 Pension Fund ManagerAUM % of Total Industry SBI PENSION FUNDS PRIVATE LIMITED31407.0938.84 UTI RETIREMENT SOLUTIONS LIMITED24831.4530.71 LIC PENSION FUND LIMITED24010.1329.70 ICICI PRUDENTIAL PENSION FUNDS MGMENT COMPANY LTD369.000.46 KOTAK MAHINDRA PENSION FUND LIMITED107.470.13 RELIANCE CAPITAL PENSION FUND LIMITED76.970.10 HDFC PENSION MANAGEMENT COMPANY LIMITED53.080.07 Grand Total80855.19100.00
  • Slide 15
  • Incentive Scenario for IFAs. Rs.75/- per Application Up front commission of 0.15% of the amount mobilised i.e. on each instalment 15
  • Slide 16
  • Annuity Service Providers Subscribers of the National Pension System (NPS) would have a choice to select Annuity Service Providers, and annuity schemes offered by them at the time of exit from NPS. Pension Fund Regulatory and Deve