What is NPS - New Pension Scheme for Bank/Insurance Employees - All You Need To Know
NPS ( New Pension Scheme ) is applicable from year 2004 for all Government Employees(central government & public sector units) and many State Governments have also implemented the same. But due to the unions' unacceptance initially, it is only applicable for all Public Sector Bank/Insurance Employees recruited after 2010.
Now let’s get to know more about NPS - New Pension Scheme.
There are total seven fund managers to manage our NPS funds.
See Also: Everything You Need to Know About NPS - Part 1
See Also: Everything You Need to Know About NPS - Part 1
- HDFC Pension Management Company Ltd.
- ICICI Pension Fund Management Company Ltd.
- Kotak Mahindra Pension Fund Ltd.
- LIC Pension Fund Ltd.
- Reliance Capital Pension Fund Ltd.
- SBI Pension Funds Pvt Ltd.
- UTI Retirement Solutions Ltd.
Tier I : This is the compulsory contribution from each individual employee and also the matching grant from employer ( In case of Bank/Insurance Employees, the contribution towards NPS is 10% of our Basic plus DA and an equal contribution from company )
Tier II : Its purely voluntary in nature. You can invest over and above compulsory contribution.
Further, Each Tier has 3 different Assets to be invested in
E: EQUITY ( Max 50% of available funds )
C: Corporate Bonds
G: Government Securities
And each Subscriber can choose Fund Manager and also the asset class ( Active Choice )to be invested in. But fortunately or unfortunately this option is not yet provided to members. Only Auto Choice is provided.
Auto Choice for different employees is as follows
For Central Government Employees: Funds collected from subscribers are allotted to three Public Sector Pension Fund Managers i.e SBI, UTI and LIC.
For Corporate Employees ( Including Public Sector Bank’s) : Government has given a choice to the banks to decide investment choice either at subscriber Level or at the Bank level on behalf of all the employees. Even the allocating the funds amongst the three asset classes can be decided by the bank.
Now here is the catch, nobody so far bothered to know where the funds are invested, which fund house is managing them, in which asset class they are invested in and which fund house has given the best return.
We should admit that we as bankers are poor in managing our own personal finance, but this NPS invest has to be taken seriously.
Let’s analyze the maturity value at different ROI. Assuming that contribution of Rs.3000/- ( And another 3000/- contribution by the bank ) is made towards NPS the following are the different scenarios
Amount In Lacs
Remaining years of Service ( Contribution to be Made )
ROI | 25 Years | 30 Years | 35 Years |
8% | 56 | 89 | 136 |
10% | 79 | 134 | 224 |
12% | 111 | 206 | 377 |
As you can see a 2% increase on investment is more than one Crore for a 25-year old employee. Further, the longer you work in the bank the more fund you can accumulate. This is called the power of compounding. Many people must have read about it in Maths class.
The detailed performance of each fund house is as follows
Under Tier I Scheme E Click here Tier I Scheme E-I
Under Tier I Scheme C Click here Tier I Scheme C-I
Under Tier I Scheme G Click here Tier I Scheme G-I
Summary of performance Since Inception
SBI | LIC | UTI | ICICI | RELIANCE | KOTAK | HDFC | |
Equity | 11.4 | — | 13.96 | 14.68 | 13.38 | 12.80 | — |
Corporate | 11.5 | — | 9.75 | 11.25 | 9.44 | 11.2 | — |
Government | 10.44 | — | 8.77 | 9.11 | 8.40 | 8.71 | — |
Total Assets managed by each fund is as follows
SBI | LIC | UTI | ICICI | RELIANCE | KOTAK | HDFC | TOTAL | |
Equity | 376 | 42 | 34 | 129 | 26 | 26 | 16 | 649 |
Corporate | 260 | 25 | 22 | 86 | 16 | 19 | 11 | 439 |
Government | 526 | 20 | 33 | 98 | 23 | 25 | 13 | 738 |
TOTAL FUNDS | 1162 | 87 | 89 | 313 | 65 | 70 | 40 | 1826 |
Majority of the funds are managed by SBI Pension Fund and Majority of the contributions are parked in Government Securities. We can simply assume that safety is the first priority.
Just analyze your NPS statement and compare your returns with other fund managers. If your fund is under performing put pressure on your bank to change the fund manager or demand for Active Choice instead of Auto Choice.
Unions and associations have to play a Major Role in this. Educate the Young Lot. Just one bad decision can make their fund shrink from 3.77 cr to 1.36 cr.
NPS is the one of your prime investment take care of it. Spend some time to discuss and take wise decisions.
Just one bad decision by bank employees by not opting for Pension has cost us one Bipartite. All the Best. If you have any query regarding NPS, you can drop me a comment.
Comments
Post a Comment