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Wednesday, 25 May 2016
Wednesday, 18 May 2016
gratuity pay under new pension system central cps
Press Information Bureau
Government of India
Ministry of Finance
03-May-2013 16:54 IST
for download plz click on this Government of India
Ministry of Finance
03-May-2013 16:54 IST
https://www.npscra.nsdl.co.in/download/ministry/Addl-relief-on-Death-or-disability-of-Govt-servants-Covered-under-NPS.pdf
Gratuity Pay under New Pension System
Death-cum-Retirement Gratuity is paid to Central Government employees under New Pension System (NPS) as it is paid under the old pension scheme. The monthly annuity under the New Pension System (NPS) is only a replacement of pension on retirement and family pension of death after retirement. The benefits of Death cum Retirement Gratuity (DCRG) and pension/family pension have been provisionally allowed, vide the Office Memorandum of Department of Pension and Pensioners’ Welfare No. 38/41/06-P & PW(A) dated 5.5.2009 in respect of Central Government servants covered under NPS in cases where a Government Servant is retired on invalidation/disability and in the case of death of a Government servant in service on the same rates as are applicable under the old pension scheme Central Civil Service (Pension) Rules, 1972. The retirement gratuity is payable to the retiring Government servant. A minimum of 5 years’ qualifying service and eligibility to receive service gratuity/pension is essential to get this one time lump sum benefit. Retirement gratuity is calculated @ 1/4th of a month’s Basic Pay plus Dearness Allowance drawn before retirement for each completed six monthly period of qualifying service. The maximum retirement gratuity payable is 16½ times the Basic Pay, subject to a maximum of Rs. 10 lakh. If the Government Servant dies while in service, the death gratuity shall be paid to his family at rates furnished in the table below:
Sl. No.
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Length of Qualifying Service
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Rate of Death Gratuity
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1.
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Less than one year
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2 times of emoluments
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2.
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One year or more but less than 5 years
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6 times of emoluments
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3.
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5 years or more but less than 20 years
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12 times of emoluments
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4.
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20 years or more
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Half of emoluments for every completed six monthly period of qualifying service subject to a maximum of 33 times of emoluments.
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Maximum amount of Death Gratuity admissible is Rs, 10 lakh with effect from 1.1.2006.
This was stated by Minister of State for Finance, Shri Namo Narain Meena, in written reply to a question in the Lok Sabha today.
***
DSM/RS/rs
question & answers
Entities in NPS
Entities in the System
NPS Architecture for All Citizens of India Sector
Pension Fund Managers
Pension Fund Managers are appointed by PFRDA to maintain the Pension contribution of all subscribers through various schemes offered by PFM. Subscribers will have the option to invest their contributions into one or more schemes of the PFMs. The PFMs will responsible for providing the Net Asset Value of the Schemes offered to the CRA. PFMs will allot units based on NAV as applicable.
Trustee Bank
NPS Trust formed by PFRDA would be responsible for taking care of the funds under the NPS. The Trust would hold an account with the Trustee Bank appointed by PFRDA. The Trustee Bank upon receiving credits from Nodal offices would transmit the information to CRA for reconciliation. The Trustee Bank shall remit fund to the entities viz. PFMs, ASPs and subscribers on receipt of instructions from CRA.
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Annuity Service Providers
Annuity Service Providers (ASPs) are be appointed by PFRDA to maintain the annuity contribution of subscribers through their various schemes. Subscribers will have the option to invest their amount into one annuity scheme upon retirement/resignation. ASPs would be responsible for delivering a regular monthly pension (annuity) to the subscriber for the rest of his/her life.
Currently, 07 Annuity Service Providers have been appointed :
- Bajaj Allianz Life Insurance Co. Ltd.
- HDFC Life Insurance Co. Limited
- ICICI Prudential Life Insurance Co. Ltd.
- Life Insurance Corporation of India
- Reliance Life Insurance Co. Ltd.
- SBI Life Insurance Co. Ltd.
- Star Union Dai-ichi Life Insurance Co. Ltd.
for details click here...
Scheme Information
"As per the present guidelines of Pension Fund Regulatory and Development Authority(PFRDA), contribution towards pension will be invested in the default schemes of three Pension Fund Managers (PFMs), viz, LIC Pension Fund Limited, SBI Pension Funds Pvt. Limited and UTI Retirement Solutions Limited in a predefined proportion, which is mentioned in the Statement of Transaction. Each of the PFMs will invest the funds in the proportion of 85% in fixed income instruments and 15% in equity and equity linked mutual funds. Hence, the employees of Central Government and Central Autonomous Bodies need not mention the details of the schemes while filling up the application form."
In NPS, a government employee contributes towards pension from monthly salary along with matching contribution from the employer. The funds are then invested in earmarked investment schemes through Pension Fund Managers.
Subscriber Registration
Subscriber is the employee of Central Government (excluding Armed Forces), and Central Autonomous bodies who have joined service on or after 1 January 2004 and is part of National Pension System.
Many State Governments have adopted NPS architecture and implemented NPS mandatorily through Gazette Notifications for their employees joining on or after a cut-off date.
Following conditions have to be met for a Subscriber to be registered with CRA;
- Subscriber is covered under the National Pension System.
- The Nodal Offices i.e. the respective Pr.AO, PAO and DDO have been registered in CRA and have been allotted registration number by CRA.
Subscriber shall submit duly filled application for allotment of PRAN as per Annexure S1 to the DDO in duplicate. Only those Subscribers of a DDO who are registered with CRA can apply for allotment of PRAN. If the DDO is not registered, it has to first register itself with CRA.
Application form for registration of Subscribers can be downloaded from the CRA websitewww.npscra.nsdl.co.in
Government employees (Central & State) can join NPS irrespective of their age at the time of entry i.e. 60 years and above, subject to the condition that the total period of contribution to NPS account shall not be more than 42 years. The procedure for registration remains the same.
Yes. PRAN can be generated online. For details on the procedure to generate PRAN online the PAO/PrAO needs to contact CRA.
Existing Subscriber who have been allotted PPAN/Employee ID have to be registered afresh in CRA system by submitting Annexure S1. Fresh registration is required to enable CRA to issue Permanent Retirement Account Number (PRAN) card to the Subscriber containing PRAN, photograph and signature of the Subscriber. Annexure S1
The following details have to be provided in the application for allotment of PRAN.
- Section A - Subscriber Personal Details
- Section B - Subscriber Employment Details
- Section C - Subscriber Nomination Details
- Section D - Subscriber Scheme details
- Section E - Declaration for I-PIN & T - PIN
The Employment details (Section B) will be provided by the respective DDO whereas all other details will have to be provided by the Subscriber. In case of existing Subscribers who have been allotted PPAN, the same needs to be provided in the form.
For Scheme details (Section C) - as per the present guidelines of Pension Fund Regulatory and Development Authority (PFRDA), contribution towards pension will be invested in the default Schemes termed Scheme of various Pension Fund Managers in the proportion of 55% in Government Securities, upto 40% in Debt Securities, upto 15% in Equity and 5% in Money Market Instruments. Hence, in the application form for PRAN, the details of the schemes need not be mentioned. Subscriber shall also submit a latest color photograph and his signature/Thumb impression (duly attested by Gazetted Officer). The Subscriber can refer to the instructions given in the form for filling the form.
The section of Personaland employment details are mandatory. Bank details are also mandatory.In case, Bank details are not available at the time of filling the form, Subscriber can provide a declaration for providing the Bank details within six months or on opening of Bank account whichever is earlier. However, some of the fields in these sections are not mandatory e.g. details of PAN. Nomination and scheme preference details are optional and can be provided any time after registration. If the Subscriber does not provide any scheme preference details, his contribution will be invested in the default scheme as specified by PFRDA. As per the present guidelines of Pension Fund Regulatory and Development Authority (PFRDA), contribution towards pension will be invested in the default Schemes termed Scheme of various Pension Fund Managers in the proportion 55% in Government Securities, upto 40% in Debt Securities, upto 15% in Equity and 5% in Money Market Instruments. Hence, in the application form for PRAN, the details of the schemes need not be mentioned.
Only those Subscribers of a PAO and DDO who are already registered with CRA can apply for Allotment of PRAN. If the PAO/DDO is not registered, it has to first register itself with CRA. On receipt of the Subscriber application forms in duplicate from the associated DDO, PAO shall verify the forms. PAO shall forward the forms along with a covering letter to the CRA-FC as per Annexure S6. The format of covering letter and list of CRA-FCs are available at CRA website www.npscra.nsdl.co.in
The Subscriber shall submit Annexure S1 to the DDO in duplicate. Immediately on joining service, the DDO should get the form duly filled by the Subscriber. On receipt of the application, DDO shall provide the employment details of the Subscriber (Section B) and attest the other details mentioned in the form. DDO shall collect and consolidate all such applications received from the associated Subscribers and forward the same to the PAO along with a covering letter as per Annexure S5. The covering letter can be downloaded from the CRA website. PAO should note that unless PRAN has been allotted, the PAO can not upload the contribution details of the Subscriber.
Checklist for DDOs is as follows:
- All the mandatory fields are filled.
- Photograph and Signature provided by the Subscriber. In case of thumb impression, it should be duly attested by a Gazzeted Officer (If DDO is Gazzeted officer, attestation can be done by the DDO also).
- Provide Employment details of the Subscriber.
- Provide Stamp and Signature of Authorized Signatory.
- Provide the DDOs covering letter with not more than 999 Subscriber Registration forms.
Checklist for PAOs is as follows:
- Employment details have been provided by DDO
- DDOs covering letter i.e. Annexure S5 enclosed with the Subscriber Registration forms (not more than 999 in a batch).
- PAO Covering letter i.e. Annexure S6 enclosed for the DDOs letter.
PAO/DDO can check the status of the Subscriber's application from CRA, by quoting the PRN or the acknowledgement number from the option "Subscriber Registration Status View" in the CRA website www.cra-nsdl.com.
Alternately, if the PAO has entered the details of forms submitted in "S1 Form submission details", the status of applications can be viewed using this functionality.
DDO shall prepare a batch of maximum 999 Subscriber applications and prepare a covering letter as per Annexure S5 for each batch and forward it to the PAO. DDO should note that number of applications covered in a single batch/covering letter should not exceed 999. e.g. if there are 1100 Subscriber applications, DDO shall prepare two batches with covering letter each - one for 999 applications and another for next 101 applications.
CRA-FC is the facilitation center appointed by CRA for accepting Subscriber Registration forms. The CRA-FC shall digitize the applications and upload the details to CRA system. The list of CRA-FCs across India is available at CRA website www.npscra.nsdl.co.in
CRA-FC can reject an application form either at the time of acceptance or during digitization if any discrepancies are noticed by it. CRA-FC shall issue a rejection memo to the PAO with the reason(s) for rejection. For such cases, a fresh application shall be submitted by the Subscriber after rectifying the discrepancies. The PAO can also view scanned copies of the S1 Forms and rejection memos by logging intowww.cra-nsdl.com using the User ID and I-PIN.
On acceptance of Subscriber application forms, CRA-FC shall issue a DDO wise Provisional Receipt containing the Provisional Receipt number (PRN), details of number of forms submitted by PAO, number of forms accepted by the CRA-FC and number of forms rejected by CRA-FC. The PRAN will be issued for each batch of application forms submitted (i.e. each DDO covering letter). Under each batch, CRA-FC shall also mention an acknowledgement number for each application contained in the batch. The acknowledgement number will be the PRN plus two digit-running serial numbers for individual forms. For e.g. the PRN can be 101877300000066, if the CRA-FC receives 45 forms the acknowledgment numbers generated for the forms will be 10187730000006601 - 10187730000006645. The Provisional Receipt (PR) will be handed over to the PAO along with the duplicate copy of Subscriber application forms containing the acknowledgement numbers.
Provisional Receipt Number
Provisional Receipt Number
PAO/PrAO can view a report of the complete rejection memo by logging into the CRA website. This report helps the PAO/PrAO understand the common reasons for which S1 Forms are rejected.
CRA has introduced a functionality wherein the PAO/ PrAO can view the S1 Form submitted to the CRA-FC using the login ID and I-PIN provided by CRA. Subscriber registration (S1) Forms either accepted or rejected can be viewed by the PAO/PrAO.
There is no restriction on the mode of delivery of subsciber registration forms to the CRA-FC. The same can be submitted by post, courier or hand delivery.
CRA has provided a functionality called "S1 Submission Details" in the CRA system to track the movement of Subscriber Registration forms from Nodal Office to CRA-FC. PAO can login into the CRA System with the User ID and password and enter the details of S1 forms submitted. CRA-FC acknowledges the receipt of forms in the CRA system along with remarks. PAO can track the status of the forms with the acknowledgement number generated and also view the details updated by the CRA-FC.
CRA shall forward the PRAN kit containing PRAN card and Subscriber Master Report along with I-PIN and T-PIN to the associated PAO for onward forwarding to DDO. The DDO on receipt of the PRAN kits from the PAO shall reconcile the PRAN kits received against the application made and hand over the PRAN kits to the respective Subscriber.The Subscriber will also receive an SMS and the PAO will receive an email on generation of PRAN.
CRA has introduced a functionality of 'e-PRAN' which allows the Nodal Offices to view the and print the 'e-PRAN' for a Subscriber. The 'e-PRAN' is similar to the physical PRAN Card and will display the core details along with photograph and signature of the Subscriber.
Friday, 13 May 2016
why annnuties poor investment
low returns, tax disadvantage and lack of liquidity make annuities a poor investment choice. Here's why you should avoid them.
Financial planners abhor them. Tax experts baulk at them. Yet, many investors pour their life savings into annuities from insurance companies. They fall for the 'guaranteed pension for life' sales pitch by insurers, without realising that this option offers very low returns, is tax-inefficient and hampers liquidity by locking up their money forever.
An annuity is a lump-sum investment, which gives a regular income to the investor for the rest of his life. It can be an immediate annuity, which starts giving returns from the very first month, or it could be a deferred annuity, which starts paying after a certain period. Right now, only insurance companies offer annuity plans in India.
One of the biggest challenges that retirees face is converting their nest eggs into regular income. There are many options before them, but an annuity is perhaps the worst. While the promise of pension for life sounds attractive, the returns offered by these plans are dismal, to say the least.
Exide Life Insurance, for instance, is offering less than 5% on the annuity option that returns the corpus after the investor's death. This is similar to the return offered by your savings bank on the balance in your account. If you opt for a sweep-in account, you could earn more by just keeping your money in the bank. "These are old rates. We have filed new rates with better yields and, hopefully, our new annuity products will be approved soon," says Kshitij Jain, CEO, Exide Life Insurance.
For many investors, buying an annuity is a compulsory evil. When they retire at 60, investors in the New Pension Scheme have to put at least 40% of their corpus in an annuity.
If you have taken a pension plan from an insurance company, you will have to buy an annuity with at least 66% of the maturity proceeds. The choice of annuity providers is also limited. "If you have invested in a plan with a particular insurer, you have to buy the annuity from that insurance company," says Jain.
Our cover story this week looks at why annuity rates in India are so low and other drawbacks of this investment vehicle. We also explain what investors can do to earn a better income from their nest eggs in their sunset years.
A major problem with annuities from insurance companies is the measly returns they offer. At a time when banks are offering 9.5-10% on fixed deposits to senior citizens, annuities offer less than 8% (see table).
The bad news doesn't end here. Unlike other financial products, in annuities investors have to consider the impact of the 3.09% service tax. So, if you were to invest Rs. 10 lakh in an annuity, Rs. 30,900 flows out as service tax. "This tax brings down the net yield from annuities further," says Jaya Nagarmat of Investor Shoppe. So, a yield of 7.5% will decline to 7.27%.
Since retirees are mostly senior citizens, they can earn much better returns if they put their money in fixed deposits instead of locking it up in an annuity. The glitch: banks are offering attractive rates on fixed deposits of relatively shorter tenures of 3-5 years.
For long-term deposits, the rates are lower at 8.5-9%, with the maximum duration of a bank fixed deposit being 10 years. So the investor is faced with the reinvestment risk.
If interest rates fall by the time his deposits mature, he will have no option but to reinvest the amount at the lower rate prevailing at that time, which would depress his returns.
On the other hand, an annuity is a contract for the long-term. "The biggest advantage of an annuity is that the rate is guaranteed for life irrespective of the interest rate movement," says G Murlidhar, managing director, Kotak Mahindra Old Mutual Life Insurance.
Other insurance companies join the chorus in favour of annuities. "In a world of uncertainties, the beauty of an annuity product is in its ability to not just offer guaranteed returns, but to do so for life to the customer," says Amitabh Chaudhry, managing director and CEO, HDFC Life.
Why annuity rates are low
There are several reasons for the low returns from annuities. First, short-term interest rates are currently higher than the long-term rates. Annuity products are linked to the long-term rates and are, therefore, unable to match the high, short-term rates. "The high short-term interest rates are an aberration. They should settle soon," says Jain. If that happens, annuity rates may go up.
The other problem is the unavailability of long-term corporate bonds, which can generate better yields than those offered by the ultra-safe, but low-yield, government bonds. Though government bonds have tenures of up to 30 years, getting enough long-term gilts is not easy. This explains, but does not justify, the yields that are significantly lower than those offered by the 30-year government bonds.
drawbaks of the new pension system
Drawbacks of the pension (NPS) scheme
The National Pension Scheme is being hailed as the next best thing to sliced bread! Well I have nothing against a scheme which is so loved by all, but let us look at some of the drawbacks that I can see in the NPS.
Well in any wealth management scheme there are 2 things to worry about – sales cost (how much of your contribution gets invested) and the cost of managing these funds. On both these counts the NPS scores and scores very well. In fact it is the Nano of the fund management industry and should have set the cat among the pigeons on both these grounds. There are no sales costs and the fund management costs at .0009 is really the lowest in the world.
However the government has not clarified what will happen to the money once you reach the 'withdrawing' or the 'reaping stage' as it is called.
Maybe in 1962 NASA knew how to put a man on moon, but it was only in 1968 that it knew how to bring him back to the earth. So it was only in 1969 that the man was actually sent to the moon! The managers at the NPS have to admit that putting a man on moon and bringing a man back are very, very different technologies. Even if I am convinced that the managers know how to manage the money at the accumulation stage, they may not be in too great a position to price the annuity. If the government tells a saver that 50% of the accumulation can be taken immediately, but the balance will be compulsorily converted into an annuity! Now the investor is doomed because he cannot argue about the pricing of the annuity.
This is scary. All the charges are specified for a period of 3 years – what happens if the charges are changed dramatically after a person has accumulated a lot of money in the fund? If a mutual fund were to increase charges, at least you can just walk away. In an NPS it is not possible – it is clearly till 'death do us apart' relationship.
The provision in the latest budget allowing the employer to claim the contribution as an expense could improve the penetration among the employer community.
Are simple solutions available?
1. The government should announce what will happen to the corpus – after the person retires.
2. The government should allow a Systematic Withdrawal Plan – useful especially if a person lives long, and is willing to be in equity from age 60 to end of life.
3. The government should announce that the annuity will be at a rate NOT LESS THAN the rate at which the government collects money in PPF or senior citizen scheme.
4. India's indices are not so great, so there should be a greater range of indices that a person should be able to choose from.
5. More government push will be necessary – the government can push it through and make it compulsory for the Railways, the Defence forces, etc.
6. As the corpus increases the costs will fall - hope there is a greater participation by the middle class of India!
7. Participants should be allowed to choose date of entry, and also date of stoppage and date of annuitization. Allowing a minor's account is also a good idea.
8. Part withdrawal should be allowed – why should I not be allowed one annuity every year that I find the markets attractive? In the sense that from my age of 60 till my age of 75 I should be allowed to contribute as well as withdraw – like a mutual fund. Depending on how attractive the anuuity markets are I will decide how much of annuity to buy and when to buy.
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