Context:
PFRDA notifies new point of presence regulations for NPS subscribers.
National Pension Scheme:
- A retirement benefit scheme introduced by the Government of India
- Launched in 2004
- Eligibility – All citizens of the country, including the unorganised sector workers
- Governing Body – PFRDA (Pension Fund Regulatory and Development Authority)
- Features –
- Individual savings are pooled into a pension fund which in turn is invested by PFRDA into diversified portfolios comprising Government Bonds, Bills, Corporate Debentures, and Shares.
- No defined benefit would be available at the time of exit from the system
- The outcome depends on the contributions made and the income generated from the investment
- Significance –
- Voluntary – People can invest any amount in their NPS account at any time.
- Permanent Retirement Account Number (PRAN) – Based on a unique number which is allotted to every subscriber.
- Portability – NPS account can be used from any location in India
National Pension Scheme vs Old Pension Scheme
| Points of Differentiation | Old Pension Scheme | National Pension Scheme |
| Nature of the schemes | OPS offer pensions to government employees on the basis of their last salary | NPS pays the employees for their investment in the NPS Scheme during their employment |
| Amount of pension derived | 50% of the last drawn salary | 60% lump sum after retirement and 40% to be invested in annuities |
| Benefits in taxes | No tax benefits | Employee can claim tax deductions of 1.5 lakh under Section 80C of income tax |
| Tax on Pension | No tax | 60% of the NPS Corpus is tax free |
| Option of investment | No option | Two choices: Active and Automatic |
| Who can avail? | Only government employees | Any Indian citizen between 18-65 years |
| Switching Schemes | OPS can be switched to NPS | No scheme to switch back to OPS, but central government employees can switch back to OPS in case of death and disablement of the employee |
Pension Fund Regulatory & Development Authority:
- Headquarters – New Delhi
- Status – Statutory Regulatory body
- Act – Pension Fund Regulatory & Development Authority Act, 2013
- Objective – To regulate pension funds to promote old age income security
- Ministry – Ministry of Finance
- Composition – A Chairperson and not more than six members
Source: Business Standard
Previous Year Question
Regarding ‘Atal Pension Yojana’, which of the following statements is/are correct?
1. It is a minimum guaranteed pension scheme mainly targeted at unorganized sector workers
2. Only one member of a family can join the scheme.
3. Same amount of pension is guaranteed for the spouse for life after subscriber’s death.
Select the correct answer using the code given below.
[UPSC Civil services Exam – 2016 Prelims]
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (c)
Explanation:
Statement 2 is not correct. The scheme is open to all adults of a family.
