National Pension System (NPS) - Abbreviations and Definitions

National Pension System (NPS) - Abbreviations and Definitions 

Abbreviations and Definitions of National Pension System compiled here under for your information. The key words are frequently used among the employees working in Central and State Governments...

The following words and expressions shall have the meaning specified below, unless the context otherwise requires: 

 

Abbreviations
ASP	Annuity Service Provider
CGMS	Centralised Grievance Management System
CRA	Central Recordkeeping Agency
DC	Defined Contribution
GRC	Grievance Redressal Cell
GRM	Grievance Redressal Mechanism
IMA	Investment Management Agreement
IPO	Initial Public Offer
KYC	Know your Customer
NPS	National Pension System
NRA	Normal Retirement Age
PFs/PFMs	Pension Funds/Pension Fund Managers
PFRDA	Pension Fund Regulatory and Development Authority
POP	Point of Presence
POP-SP	Point of Presence – Service Provider (Authorized branches of POP for NPS)
PRA	Permanent Retirement Account
PRAN	Permanent Retirement Account Number
TB	Trustee Bank
FEMA	Foreign Exchange Management Act

Definitions
Applicable NAV	Unless stated otherwise in the Offer Document, 'Applicable NAV' is the Net Asset Value at the close of a Working Day.
Applicant	An individual who has expressed interest in joining NPS and has duly completed all formalities.
Custodian	Agency responsible for holding assets of the NPS Trust. Refers to the Stockholding Corporation of India Limited (SHCIL)
IMA	Investment Management Agreement, entered into between NPS Trust and the Pension Funds.
Offer Document	This document, issued by PFRDA, making an offer to potential applicants to subscribe to NPS.
RBI	Reserve Bank of India, established under the Reserve Bank of India Act, 1934.
Subscriber	An individual who has become a member of the NPS
Unit holder	Subscriber is also referred to as unit holder with respect to the units he/she owns.
Trust Deed	The Trust Deed entered into between the NPS Trust and PFRDA, as amended up to date, or as may be amended from time to time.
Trust Fund	The corpus of the Trust and all property belonging to and/or vested in the Trustees.
Working Day	A day other than any of the following (i) Saturday or Sunday; (ii) a day on which banks including the Reserve Bank of India are closed for business or clearing and (iii) a day on which the Purchase and Redemption of Units is suspended.

Courtesy : http://90paisa.blogspot.in

New Pension Bill, PFRDA Bill, 2011: Frequently Asked Question (FAQ)

Frequently asked questions about the new Pension Bill, PFRDA Bill, 2011, are given below.

1. What does the new pension law do?

•   The PFRDA Bill, 2011, (proposed to be enacted as a law) provides for the establishment of an Authority to promote old age income security by establishing, developing and regulating pension funds, to protect the interests of subscribers to schemes of pension funds and for matters connected therewith or incidental thereto.
  An Interim Authority has already been created vide Govt Resolution dated October 10, 2003, and November 14, 2008, and is fully functional. The passage of the bill will confer statutory status to the Interim PFRDA to develop and regulate National Pension System (NPS) earlier known as New Pension Scheme.

2. What is NPS ?

•   The National Pension System reflects (NPS) Government’s effort to find sustainable solutions to the problem of providing adequate retirement income.
• The NPS is an easily accessible, low cost, tax-efficient, flexible and portable retirement savings account. Under the NPS, the individual contributes to his retirement account and also his employer can also co-contribute for the social security/welfare of the individual.
• The NPS is designed on Defined contribution basis wherein the subscriber contributes to his account, there is no defined benefit that would be available at the time of exit from the system and the accumulated wealth depends on the contributions made and the income generated from investment of such wealth.
• Eventual pension wealth is based on the level of contributions made over the years, the charges (administrative and fund management) deducted from the funds and the returns achieved by the investment fund (pension fund managers) used over a period of time during the accumulation phase in the NPS.
• The greater the value of the contributions made, the greater the investments achieved, the longer the term over which the fund accumulates and the lower the charges deducted, the larger would be the eventual benefit of the accumulated pension wealth likely to be.

3. Why should one subscribe to a pension fund?

•   Pension ensures that a person has steady and adequate financial security during his old age, even after he has retired from employment or his earning capacity has extinguished/decreased.

4. What does the pension bill propose?

•   The PFRDA shall administer the NPS for subscriber’s interest in accordance with the provisions of the PFRDA Act and the rules and regulations framed thereunder. The Authority has the mandate to regulate all other pension funds (other than the NPS) which are not regulated by any other enactment.

5. Is it compulsory?

•   The NPS is compulsory in respect of persons appointed to public services in connection with the affairs of the Union, or to All-India Services, on or after 1-1-2004. It is also compulsory in case of employees of Central Autonomous bodies.
• The NPS is also applicable in respect of employees of various state governments and its autonomous bodies, who have joined the NPS and in respect of whom, such state governments have extended the NPS based on the notifications issued by such states.
• The NPS is voluntarily extended to the citizens of India w.e.f May, 2009, who may choose to be covered under the NPS. The NPS has also been extended to various corporates, who may choose to provide the scheme to their employees on a voluntary basis.

6. When was it first introduced?

•   The PFRDA Bill 2005 was introduced in Lok Sabha in March, 2005, but could not be considered and passed due to dissolution of 14th Lok Sabha. Earlier, the PFRDA Ordinance 2004 was promulgated on December 29, 2004, which lapsed on April 7, 2005.

7. Can one decide how much on ones savings should go into stocks and how much in debt?

•   Presently, in respect of government employees, the investment choice in asset class E (Equities), asset Class C (Corporate Debts) and Asset Class G (Government Securities) is in accordance with investment pattern contained in Ministry of Finance notification No. F. No. 5 (88)/2006 –PR.— dated August14,  2008. For others different schemes are applicable based on the choice exercised by the subscriber.

8. If stock prices crash, will pension be affected?

•   The rate of return and NAV (Net Asset Value) of the subscriber will be susceptible to market risk.

9. Can one choose the stocks in which pension fund will put the money?

•   Pension Fund Managers based on their expertise will choose the stocks for investing the collective monies of the subscriber (under full disclosure to the NPS Trust). However, individual subscriber will not have the option of choosing a particular stock.

10. Can one withdraw money whenever one wants or only after one retires?

•   The subscriber can exit from the NPS and withdraw the accumulated pension wealth in the following manner and no other exits or withdrawals are permitted presently:
  
  • a. Upon attainment of age of 60 years   : At least 40% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of an annuity providing for the monthly pension of the subscriber and the balance is paid as a lump sum payment to the subscriber.
  • b. Upon Death (irrespective of cause)   : The entire accumulated pension wealth (100%) would be paid to the nominee / legal heir of the subscriber and there would not be any purchase of annuity/monthly pension.
  • c. Exit from the NPS before attainment of age of 60 years (irrespective of cause):   At least 80% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of an annuity providing for the monthly pension of the subscriber and the balance is paid as a lump sum payment to the subscriber.

11. Can it help the industry?

•   The industry can benefit by the availability of long term funds under the NPS, which may be deployed to build infrastructure. The industry can also provide the  NPS as an important social security scheme to the employees serving in such industries.

Source: http://english.manoramaonline.com

Loksabha Passes Pension Bill - Key Points

The Lok Sabha today passed the Pension Fund Regulatory and Development Authority Bill 2011, which will open the doors for foreign investment in pension funds. The bill aims to create a regulator for the pension sector and extend the coverage of pension benefits to more people. The Pension Bill has been hanging fire since 2005 when it was first introduced in the Parliament. It was again reintroduced in 2011.

Features of New Pension Bill

1: The Pension Fund Regulatory and Development Authority Bill 2011 will give statutory powers Pension Fund Regulatory and Development Authority (PFRDA) which was established in August 2003 as a regulator for the pension sector.

2:  The bill allows 26% foreign direct investment (FDI) in the pension sector or such percentage as may be approved for the insurance sector, whichever is higher. At least one of the pension fund managers shall be from the public sector.

3:  The subscriber seeking minimum assured returns shall be allowed to opt for investing their funds in such scheme providing minimum assured returns as may be notified by the authority.

4: Withdrawals will be permitted from the individual pension account subject to the conditions, such as, purpose, frequency and limits, as may be specified by the regulations.

5: This bill would also provide subscribers a wide choice to invest their funds including for assured returns by opting for government bonds etc as well as in other funds depending on their capacity to take risk.

6:   The passage of the bill could see pure pension products coming into the market. At present most of the pure pension products available in the market are linked with insurance coverage.

7: In 2005, the government had earlier introduced a pension bill but it lapsed as the Lok Sabha's term got over before the legislation could be passed.

8: The Pension Fund Regulatory and Development Authority Bill 2011 was reintroduced in the Lok Sabha in 2011 by the then finance minister Pranab Mukherjee and it was subsequently referred to a standing committee.

9: PFRDA's National Pension System (NPS) was made mandatory for all new government recruits, except armed forces, joining after January 1, 2004.

10:   The NPS was later opened up to all Indian citizens from 2009 on a voluntary basis.

11:  The NPS allows its subscribers to invest in stock markets but there is a cap on equity investment. The NPS also offers subscribers the option of selecting the fund managers of their choice.

12:   The pension bill could help channelize funds into building long-term assets for the country, including the infrastructure sector. The government wants to ease rules for insurance and pension sectors to allow them to invest in infrastructure, where it is seeking $1 trillion investment till 2017.

Courtesy : http://www.imyideas.com/ & sapost.blogspot.com