10 Recent NPS Updates You Can't Ignore | Maximize Your Benefits from the National Pension System

much like any startup The NPS the national pension system has gone through many tweaks and changes over the past few years I remember there was a time when at least 60% of the coers had to be allocated to an annity which has since been brought down to 40% the entry age has been revised twice from 60 to 65 and then from 65 to 70 years NPS itself was first introduced for government employees which was later extended to all citizens of India a majority of the work is now being done online new pension fund managers have been regularly added etc etc now I've covered many of these changes in a previous video but the pace of Change Is So frantic that I had no choice but to make this updated video which is truly a compilation of new rules and regulations over the last two years if you're already an NPS subscriber or are looking to enroll into one and now that the tax season is looming then I'm sure you'll find this video extremely useful I should also mention that this was not an easy thing to compile and because NPS is not my strong suit suit I'll request you to do your own research on top of this and to help out I've added a nice long list of resources and links in the videos description let's [Music] begin all right so let's start with something that I got wrong in my previous video actually I got a couple of things wrong firstly an oci an overseas citizen of India can invest in NPS I think I said he or she cannot invest which was wrong so sorry about that and secondly what I had said and what I had thought is that a subscriber can choose only one pension fund manager across assets which also turned out to be wrong because since last year NPS subscribers can choose different fund managers for different asset classes if you're an NPS subscriber I do hope you're taking advantage of this because a you can now pick and choose the more consistent above average performers across assets and secondly unlike mutual funds there are no tax implications of switching from one scheme to the other across pension managers or asset classes if you're wondering which are the better ones then here's something I borrowed from a study done by Ed money so with regards to class E that is equities the schemes of HDFC IC and Kodak have done well LC HDFC and adya baa are the top three when it comes to government securities and HDFC adya baa and SBI have the best returns when it comes to corporate bonds so if you are an NPS subscriber or are wanting to become one then use this data use this flexibility to improve the returns of your long-term NPS [Music] portfolio Okay so until now NPS subscribers upon retiring were allowed to withdraw up to 60% of their accumulated funds in a tax-free lumpsum mode while the balance 40% was to be allocated to an annity instrument while there are no changes to the 40% part subscribers can now choose to withdraw the 60% part either as lumpsum or or on a periodic basis once they reach 60 years of age formerly this is called systematic lumpsum withdrawal or slw and one can choose to receive his or her retirement payments in a monthly quarterly half yearly or annual mode until the age of 75 so this is a lot similar to what mutual funds offer in terms of a systematic withdrawal plan with one major difference that is no tax needs to be paid on slw receipts or at least that's my understanding because according to section 1012a of the income tax act lumpsum withdrawal from NPS of up to 60% are exempt from taxes and idly the same rule should be applied in this case also of course I'm not a tax expert so please consult your tax adviser on this and don't forget to read this FAQ document which explains some of the final points like how can a subscriber activate the slw facility when will the first installment be paid out can slw be modified or canceled in the future what happens if the subscriber expires and stuff like that my point is this SL W facility is a big relief for NPS subscribers as most of them would have little idea of what to do with that huge 60% lumpsum and now they can withdraw a little bit every month for their expenses they don't have to pay taxes on it and the cus continues to grow within the NPS [Music] environment another rule the pfrda has recently introduced I think in October of last year is a mandatory penny drop verification so penny drop is an account verification method that in involves depositing a small amount let's say one rupe or two rupees in the subscriber bank account for authentication before crediting funds to the beneficiary so essentially issues like name mismatch invalid or inactive account number wrong ifsc code Etc are taken care of through this verification and funds get credited to the beneficiary without any delays since this is mandatory now that is you can't withdraw any funds before this authentication I'll request all subscribers to complete this penny drop exercise as soon as possible and if you face any issues then do involve the relevant noal office or your intermediary to rectify the same also please note this penny drop thing applies not just to NPS but to also the atal pension yoga and NPS light and also in case there are any modifications in the subscribers Bank Account [Music] Details another Pleasant update and something that subscribers like you and me would appreciate is the unified view of our personal Investments with which not only includes our demat account and mutual fund Holdings but also the updated Mark to market value of one's NPS accounts in that context the pfr issued a circular on the 10th of August last year allowing Central recordkeeping agencies so cams kintech and protein to integrate The NPS statement of transaction with the more popular Consolidated account statement or cast that's offered by sebi register depositories but please note this feature is consent based which means The NPS subscriber has to enable this feature by registering on the cams K fintech or protein website when doing that keep a few things handy like your pran that is the permanent retirement account number and OTP the date of birth a couple more details and if everything matches then The NPS account will be included in the cast and will start appearing in it from the following month onwards incidentally this feature is not free and there is a very nominal charge of 1 rupe for a physical statement request and 10 PESA for an email statement speaking of emails and consolidation one place to find some interesting investing worthy ideas is my newsletter that is now read by over 16,000 investors some of the featured stories include the TCS buyback opportunity and how one can make 18% profit in a single month which developers stand to benefit from ahad's 2036 Olympic bed why the stock price of BC limited surged by almost 300% in just 6 months while the promoters of JTL Industries are buying shares at higher than its market price the 12% eeld that infrastructure investment trusts are offering and many more the stories featured here are some of my high conviction ones so if you haven't subscribed to it then kindly do so and also share it in your WhatsApp [Music] groups in October of 2022 the pfrd announced some changes with respect to the equity exposure on NPS accounts so prior to October under the active Choice option NPS subscribers could allocate up to 75% of their funds to equity in a tier one account however on crossing the age of 51 the allocation limit is gradually reduced by 2 and a half% every year which means it becomes 72.5% then 70% at the age of 52 and by the time the subscriber is 60 years old this limit comes down to 50% the change that pfrd affected is that active Choice subscribers can now continue to allocate up to 75% of their funds in equity even after Crossing 51 years of age without any gradual deduction until the age of 16 which means tier one NPS account holders can go up to 75% in equity up to 60 years and if you have a tier 2 account then one can allocate up to 100% in equity while the earlier limit was [Music] 75% in May of 2023 the pfrd released a circular that said the option of multiple anti shall be provided for those subscribers who earmark an anity Corpus of more than 10 lakh Rupees wherein 5 lakhs is utilized to buy each anti scheme so this option of multiple anes wasn't there earlier but now that the pfrd has allowed it it means an NPS subscriber can diversify across a broad range of anity options and it also gives more flexibility as one can choose different payout options like a monthly mode from one scheme and an annual mode from the other in line with the subscriber cash requirements the article I read to this effect also indicated that the cras that is cams protein and Kint Tech will need more time to build these functionalities and until then the life insurers will handle these requests for multiple ities and feed it back to the cras Via a reverse information flow so this is again a small tweak by The NPS regulator but something that can help the subscribers at [Music] large all right so effective the 1st of April 2023 the pfrda has mandated the upload of certain documents in order to speed up and simplify a subscriber's anti payments after he or she exists the national pension system this communication came in February of last year and the list of documents includ includes the npf exit or withdrawal form a proof of identity a proof of address as per what's specified in the withdrawal form a copy of the bank account and also a copy of the pr card relatively it was in 2022 that the pfrda had announced that NPS subscribers would not be required to complete a separate proposal form for selecting an annuity and the exit form submitted by the subscriber would double up as an annuity proposal form as one can understand less paperwork definitely reduces the time it takes for a life insurance company to issue an anti policy leading to better service experience for the [Music] subscriber yet another Improvement that helps subscribers is the reduction in settlement time which means faster withdrawals in that context the pfrd announced in August of 2022 that The NPS intermediaries that is the three cras the 12 Pension funds and the custodians have all enhance their it capabilities and their improved system was capable of processing a withdrawal request in a t plus2 Working Day settlement cycle which was earlier done on a t plus4 basis which means now if a withdrawal request is authorized by 11:00 a.m. then it'll be settled on a t plus2 Working Day basis which is definitely a better customer experience for The NPS subscriber in terms of withdraw request this covers the entire range or most of it including super annuation premature exit exit due to death anity withdrawals tier 2 withdrawals partial withdrawals oneway switches rebalancing and much more [Music] okay this should not surprise anyone but the unified payment interface or UPI has made enrolls into NPS albeit in a phe format now before UPI was introduced all NPS contributions were done using net banking that is via imps neft and rtgs then in 2020 UPI entered the freay and payments of up to 2,000 Rupees were allowed in a single transaction then in 2022 the pfrda made some improvements in the process and subscribed could use this complicated looking UPI handle to make contributions understandably this wasn't very convenient and with the virtual account number being different from the plan and different numbers required for Tier 1 and tier 2 accounts it was very evident that a simpler and more efficient method was needed and so in December of last year the regulator enabled contributions via a QR code which essentially meant any investor could Now quickly generate the personalized QR code for the tier one and tier 2 accounts and then use any UPI enabled app to contribute by scanning these QR codes understandably this improved process is not only faster and easier but also reduces any errors or mistakes that might have happened along the [Music] way right so what I've compiled so far is all the goody goody stuff but something that I'm sure would have definitely Ed many NPS subscribers is pf's removal of credit cards as a contribution paying instrument this new rule came into effect from August of 20 22 but presently this is only applicable to tier 2 accounts where contributions cannot be made via credit cards now while subscribers can continue to use their credit cards for making their tier one contributions personally I think this move is in line with what's happening elsewhere that is the use of credit cards for investing in mutual funds or stocks is any way discouraged so this is no different and because a tier 2 account is a lot like a mutual fund this rule change was just a matter of time so as one can see here the regulators and intermediaries have been doing a lot of stuff and from what I've read and heard there is a lot more coming especially around the products the user interface reduction in charges quicker turnaround better customer service the greater adoption of NPS as a retirement tool and much more I'm sure there will be another update from my end a few months from now but if you like this video then do give it a thumbs up share it with your friends and I'll see you next week until then [Music]

Channel: Shankar Nath

Views: 197,802

Keywords: shankar nath, beginners buck, shankarnath, sankarnath, akshat shrivastava, pranjal kamra, soic, finology, rachana ranade, sahil bhadviya, parimal ade, vivek bajaj, labour law advisor, warren buffett, investing, investment, nifty, sensex, stock markets, mutual funds, nps, national pension system, nation pension scheme, national pension scheme, NPS Tier 1, NPS Tier 2, NPS Tier I, NPS Tier II, nps scheme, nps pension, nps withdrawal, nps account, national pension system card

Id: DueR9-o7BGg

Length: 13min 33sec (813 seconds)

Published: Sun Feb 25 2024