In this article, Akanksha Singh of Meerut College discusses the benefits of Corporate National Pension Scheme for Employees.
Introduction
The Central Government has introduced the National Pension Scheme (NPS) with effect from January 01, 2004. NPS Corporate Sector Model is the tailored version of body NPS to suit numerous employer-employee relationship. This would ease corporate entities and other registered bodies to move their current and eventual employees to NPS architecture.
The ‘Corporate Model’ of NPSis laid out for workforce employed in the corporate sector. Let us know more about NPS-Corporate Sector Model and how it can help us be well-heeled.
Corporate National Pension Scheme
- The Central Government has introduced the National Pension Scheme with effect from January 01, 2004 (except for armed force).
- The Pension Fund Regulatory and Development Authority (PFRDA), the regulatory body for NPS, has appointed the NSDL as the Central Recordkeeping Agency (CRA) for the National Pension Scheme.
- CRA carries out the functions of record keeping, administration and also the customer service for all subscribers under NPS.
- CRA shall issue a Permanent Retirement Account Number (PRAN) to each subscriber and record database of each Permanent Retirement Account along with recording transactions relating to PRAN.
- It is another way for retirement planning, available to the organized sector and does not reduce their responsibilities under any other statutory provision like the Provident Fund etc.[1]
Eligibility For Corporate To Join NPS
- Companies registered under Companies Act
- Registered Bodies under various Co-operative Acts.
- Public Sector Enterprises
- Public Sector Enterprises of State
- Limited Liability Partnership which is registered under the Act
- Body under any act of Parliament or State legislature
- Proprietorship
- Trust Society. [2]
NPS Architecture-Corporate Sector Model
A separate model has been launched by the Pension Fund Regulatory and Development Authority (PFRDA) to provide NPS to corporate employees including PSUs since December 2011. The NPS architecture under the corporate sector model is given below:
Pension Fund Regulatory and Development Authority (PFRDA)
- PFRDA is a regulator for the NPS.
- It is responsible for the appointment of intermediaries in the system such as NPS trustee Bank, Custodian, Central Record Keeping Agency (CRA), etc.
- Intermediaries performance are monitored by PFRDA.
- Regulatory guidance to PFMs for investment of funds received under NPS is provided by PFRDA.
Point of Presence
Between the corporate/subscribers and the NPS architecture the Point Of Presence will be the interface. The POP service provider is the authorized branches of registered POPs.
Functions which are performed by POP are :
- Registration of corporation and subscriber
- Know Your Customer verification
- Instruction from corporate
- Receiving contribution
- Transmission of the same to designated NPS intermediaries
How can corporate join NPS
- Corporate desirous of extending the National Pension Scheme (NPS) to their employees would need to tie up with any of the approved Point of Presence (POP) under the NPS through a Memorandum of Understanding (MOU).
- The format of the Memorandum Of Understanding is to be arranged by the Point Of Presence (POP) with mutual understanding with the corporate subject to the maximum charge as prescribed by the Pension Fund Regulatory and Development Authority (PFRDA) and compliance of service level requirement/turnaround time as applicable to POP within the NPS architecture.
- Through POPs as per the existing model available, any eligible corporate entities may enroll their employees under NPS.
- Deliberation with the corporate client POP shall create in house mechanism and procedure for approval of consolidated data and aggregated fund for upload to trustee bank and Credit Rating Agency (CRA).
- The CHO-1 form would be complete by corporate and submit along with the details of Corporate Branch Offices, CBO (CBO may be zonal/regional controlling offices where the underline employees are posted) to the designated POP.
- It would be ensured by POP that the forms are received and subscribers registered before receipt of the contribution from the corporate. Under NPS Usual turnaround time (TAT) as prescribed would be applicable for receipt of money.
- CRA, trustee bank, and other intermediary structure be same as all citizen model.
Investment Choice
There is a flexibility to provide investment scheme preference to the Personal Financial Management (PFM and investment choice) either at corporate level centrally or subscriber level for all its subscribers in NPS.
Selection of PFM
The corporate or subscriber (employee) can select any one of the following PFMs:
- SBI Pension Fund Private Limited
- LIC Pension Fund Limited
- UTI Retirement Solution Limited
- ICICI Prudential Pension Funds Management Company Limited
- Kotak Mahindra Pension Fund Limited
- Reliance Capital Pension Fund Limited
(the latest list of PFMs is available on PFRDA website)
Investment choice for Asset Allocation
The subscriber, as well as the corporate may have any of the two choices for their asset allocation:
- Active Choice
How your NPS pension wealth is to be invested across asset class E (up to 50%), asset class C and asset class G is available to the corporate/subscriber and these options should actively decide by the corporate/subscriber.
- Auto Choice
In this option, the investment will be made in a life-cycle Fund. Across three asset classes, the fraction of the fund is invested and will be determined by a pre-defined portfolio (which would change as per the age of subscriber).
Table for the life-cycle fund is given below:
Note:
Asset Class E: Investment in predominantly equity market instrument.
Asset Class C: Investment in Fixed income instruments other than Government Securities
Asset Class G: Investment in Government Securities
Table for Lifecycle Fund
| Age | Asset Class E | Asset Class C | Asset Class G |
| Up to 35 years | 50% | 30% | 20% |
| 36 years | 48% | 29% | 23% |
| 37 years | 46% | 28% | 26% |
| 38 years | 44% | 27% | 29% |
| 39 years | 42% | 26% | 32% |
| 40 years | 40% | 25% | 35% |
| 41 years | 38% | 24% | 38% |
| 42 years | 36% | 23% | 41% |
| 43 years | 34% | 22% | 44% |
| 44 years | 32% | 21% | 47% |
| 45 years | 30% | 20% | 50% |
| 46 years | 28% | 19% | 53% |
| 47 years | 26% | 18% | 56% |
| 48 years | 24% | 17% | 59% |
| 49 years | 22% | 16% | 62% |
| 50 years | 20% | 15% | 65% |
| 51 years | 18% | 14% | 68% |
| 52 years | 16% | 13% | 71% |
| 53 years | 14% | 12% | 74% |
| 54 years | 12% | 11% | 77% |
| 55 years | 10% | 10% | 80% |
How to raise a grievance?
NPS has various layered grievance redressal mechanism which is easily accessible, quick, responsive, simple, fair, and effective. As an option for registering grievance or complaint, the following alternatives are present with the subscriber.
Call centre/interactive voice response system (IVR).
CRA call center toll-free telephone number is 1-800-222080 the subscriber can contact the CRA on given number and register the grievance. On successful registration of your grievance, the token number will be allotted by the customer care representative for any further reference.
Web-based interface
At https://cra-nsdl.com, the subscriber can register the grievance with the use of the I-pin allotted to him at the time of opening a permanent retirement account. If a registration is successful, a token number will be displayed on the screen for future reference.
Physical form
In the prescribed format the Subscriber can submit the grievance to the corporate/POP who would forward it to CRA Central Grievance Management System (CGMS).
Who Can Subscribe To NPS
One should be the citizen of India, can be resident or non-resident, and must be subject to the following conditions:
- A person must have attained the age of 18 and should not be more than 60 years old at the time of submission of applications.
- A person must adhere to the Know Your Customers (KYC) Guidelines. The applicant, all terms, and conditions mentioned therein should be complied with.[3]
Benefits Of Corporate National Pension Scheme For Employees
Tax benefits for Employees
An employee can contribute directly to the NPS and also can make the contribution through his employer. Both the contribution is acceptable for tax deduction is given below.
Contribution deposited by Employee
- Investment up to 10% of Salary which includes Basis + Allowance is deductible u/s 80CCD (1) of Income Tax Act, 1961 subject to 1.5 lakhs limit of Section 80C from taxable income.
- Up to 40% of Corpus withdrawn is exempt from tax amount invested in the annuity is fully exempted.
Contribution routed through the Employer
- An investment made up to 10% of salary in which Basic = Dearness Allowance is included will be deductible from taxable income u/s 80CCD (2) of Income Tax Act 1961.
- Tax exemption for contribution towards the NPS by employers on behalf of employees is provided by the Government.
- Employee contribution is eligible for income tax deduction under this.
- The contribution made by an employee up to 10% of basic+dearness allowance is eligible for deduction u/s 80CCD within the Rs. 1 lac limit.
- Companies have to offer their employees the mandatory retirement saving. [4]
Lower Cost
Whenever the comparison is made of investing in other financial funds, such as mutual funds, the costs of investing in the National Pension System are less than others. This means a higher integration of the contribution is invested, which makes subscribers to earn higher returns on the investments which are made by them.
Flexibility and transparency
If employees change their location/employment they can move their NPS accounts. The scheme is regulated by the PFRDA and it is transparent. Subscribers do have control over how their contributions are invested in different, area, assets, in equities, corporate bond, and government bonds, etc.
UK Pension Scheme For Corporate Employees
Pension Schemes Bill 2014 to 2015 to Parliament on 26 June 2014. It sets out a new legislative framework for private pensions. It aims to make greater risk-sharing between employers, individual members and third parties easier. The Bill is intended to encourage pension schemes and schemes that provide ‘collective benefits’.For example, it corrects an anomaly in Sections 3 and 5 of the Pensions Act 2008 which can produce a duty to automatically enroll and re-enroll jobholders. The Act deals mainly with proposals for a single-tier state pension.
The Pensions Act 2008 put into law changes to the private pension system set out in the white paper, ‘Personal Accounts: a new way to save’, which was published in December 2006. It included the changes to workplace pensions that came into effect in 2012. [5]
National Employment Savings Trust
- To support automatic enrolment they have introduced a new workplace pension scheme which is known as the NEST (National Employment Savings Trust). It is a qualifying scheme for automatic enrolment purposes and available for every employer who wants to use it to meet their duties.[6]
Who can avail benefits under the scheme?
- Employees of the Corporate Sector.
- Employees of the other Registered Bodies,
- Employees of Central and State Government cannot take the benefit of the Scheme.
- Those who are working in entities which registered under the Companies Act and cooperative Acts, registered under partnership act, and proprietorship concerns, trusts and societies can avail of the additional tax exemption under this model.
- On December 2011 after the announcement in the Union Budget early the year the tax benefit on employer’s contribution was introduced.
Conclusion
After going through the above states, the below can be drawn as a conclusion
- All the employees of Corporate Sector can take the benefits of Corporate National Pension Scheme can avail of the additional tax exemption under this model.
- Only the person between the age of 18 to 60 can subscribe for NPS. Also one should comply with the Know Your Customers Guidelines.
- Corporate National Pension Scheme provides tax benefits to the employees.
- National Pension Scheme was introduced by the Government for the welfare of employees.
- The benefit of the Corporate National Pension Scheme can only be taken by Companies registered under Companies Act and cooperative Acts also by the registered partnership firms, proprietorship concerns, trusts, and societies.
- The costs of investing in NPS is comparatively less than other funds.
References
[1]Eligibility for corporate to join NPS
https://www.npscra.nsdl.co.in/organised-sector.php(Date of visit is 05/02/18 and the time of visit the site is 10:05 AM IST)
[2]Eligibility for corporate to join NPS
https://www.npscra.nsdl.co.in/organised-sector.php(Date of visit is 05/02/18 and the time of visit the site is 10:30 AM IST).
[3]Who can subscribe to NPS
https://www.npscra.nsdl.co.in(Date of visit is 05/02/18 and the time of visit the site is 11:15 AM IST)
[4] Exemption in tax ( Book of Companies Act 1956 and 2013)
[5]UK pension scheme for corporate employees
https://www.gov.uk/government/collections/pension-schemes-bill-2 (Date of visit is 05/02/18 and time of visit the site is 12:00PM IST)
[6]National Employee Saving Trust
http://www.nestpensions.org.uk/schemeweb/NestWeb/public/home (Date of visit is 05/02/18)
[7]https://npscra.nsdl.co.in/download/government-sector/corporate/Corporate-Brochure.pdf(Date of visit is 16/02/18 and time of visit the site is 12:00AM IST)
