<div><em>Making NPS available online is all the more important now for PFRDA. Not just NRIs, even resident Indians will stand to gain, writes <strong>Sunil Dhawan</strong></em></div><div> </div><div>National Pension System (NPS), the lowest cost retirement focussed investment option, which had been available only for resident Indians so far, has now been thrown open to the non-resident Indians (NRI) as well. The modifications have been made in the FEMA Act to bring about this change. Accordingly, NRIs can now onwards invest in NPS which is governed and administered by the Pension Fund Regulatory and Development Authority (PFRDA).</div><div> </div><div>For an NRI to open an account of NPS and start investing in it, the funds need to be paid by the NRIs either by inward remittance through normal banking channels or out of funds held in their NRE/FCNR/NRO account. When it comes to repatriation of funds, there shall be no restriction on repatriation of the annuity or accumulated savings. </div><div> </div><div>For starters, NPS is a retirement focused scheme regulated by a statutory body, Pension Fund Regulatory and Development Authority (PFRDA). NPS is a defined contribution schemes i.e. what an investor accumulate and get as pension after retirement is depended on how much is put into the scheme. </div><div> </div><div>The return therefore is not guaranteed but depends on performance of underlying assets. What makes NPS stand out amongst several other investment alternatives are its low-cost, easy accessibility and an option to build a corpus through market-linked asset classes. </div><div> </div><div>Anyone between 18 and 60 can join NPS, with a minimum investment of Rs 6,000 a year after fulfilling the KYC requirements. One gets a Permanent Retirement Account Number (PRAN) which captures all the data including personal details and transactions. At age 60, the contributions stops and one is allowed to withdraw up to 60 percent of the corpus while annuity starts on the balance 40 percent of the NPS corpus from any of the seven designated annuity providers.</div><div> </div><div>The returns in NPS are linked to market performance and there are two options to manage funds – Active choice and the Auto Choice. Under the Active choice, there are three fund options – E, C, G. In (E), a maximum of 50 per cent of the portfolio is into equities; (C) is primarily into fixed income instruments other than government securities; (G) is primarily into government securities. If one is not comfortable in deciding, there is the Auto choice, under which the funds invested automatically begin with a maximum equity exposure of 50 per cent till the age of 35 years and then tapers off to 10 per cent by age 55. The fund management cost in NPS is 0.01 per cent. The lesser the cost, lesser it eats into the corpus during the accumulation phase.</div><div> </div><div>For NRIs, it’s crucial that NPS gives them the opportunity to not only open the account online but also keeps the documentation process paperless as far as possible. PFRDA is already in the process of online NPS and soon, one may be able to not only save tax but also save for one’s retirement at the most cost-effective manner.</div>
