It has been a while since I updated about the National Pension Scheme. But believe me, you didn't lose anything. As usual, government and their policies takes time to move and reach out to public. The movement is very slow in putting all the things in place and setup for enduser investing. I see lot of blogs than lastyear with more details especially many compliants about the way it is being handled.

With all the initial hype and great interest from NRI's, we expected the NPS would be up and running efficiently by now with more marketing from POC's and banks. But thats not truth, things are moving in snail fast. Anyway, here are some information, links and forms which you can go through

One good news, many banks which are declared as Points of Presence (POP) are setting up centers to support this scheme and slowly jumping in the band wagon. Their current target is focused mainly on citizens of India living in India and not many banks have good information about how to NRI's.

One bank which I just came across being named among POP's for NPS is focusing on Gulf/Middle East NRI  community is South Indian Bank. The SIB claims to be the largest service provider for the scheme, having the highest number of authorised branches for offering services under the NPS. You can learn more about their service by visiting their website at SIB.  Other banks who are named as POP's are also offer NPS and accept contributions are listed below:

Allahabad Bank,
Axis Bank Ltd,
Bajaj Allianz General Insurance Co Ltd,
Central Bank of India (CBI),
Citibank,
Computer Age Management Services Private Ltd,
ICICI Bank Ltd, IDBI Bank Ltd,
IL&FS Securities Services Ltd,
Kotak Mahindra Bank Ltd,
Life Insurance Corporation of India,
Oriental Bank of Commerce,
Reliance Capital Ltd,
State Bank of Bikaner&Jaipur,
State Bank of Hyderabad,
State Bank of India,
State Bank of Indore,
State Bank of Mysore,
State Bank of Patiala,
State Bank of Travancore,
Union Bank of India and
UTI Asset Management Company Ltd

Click here to see the detail list of branches in various cities. Also here is the registration form to register with POP.

Here are few Articles I came across which might interest your on this topic.

Details about South India Bank and NPS at thepeninsulaqatar.com

Reasons why NPS is not growing as expected at Business-standard.com

Questions&Answer about NPS economytimes.com

NPS not Cheap by businesspandit.com

ICICI NPS FAQ at ICICI.com

To conclude, it will take more time to get much more clearance on the process and availability of the scheme for NRI's more easily. Please continue the research and you are welcome to share any good information here. I will also keep updating on this topic when I hear any thing new so keep checking.

Is it necessary that we work for money all our life? Is money the only motive of our career? Can we afford to pick and choose our job? Do we have the luxury of considering the non-monetary factors while choosing jobs? Isn’t money just a ticket to our happiness? Doesn’t life have more beautiful things to offer than just targets, deadlines and conferences?! If all these questions bother you, there is a way out.

Each of us can presently place ourselves in one of the four quadrants depending on our main source of income.

All of us should aim to move from our present quadrant to quadrant 4 at the earliest, where we shall not be slaves of money but masters of money. Remember, slaves work for masters and not vice versa. Some of us get to do it early and the others, hopefully on retirement.  Money after all is just a piece of paper and mighty humans cannot be slaves of paper for long.

Let us not assume that those in the 4th quadrant are lazy mortals with out any purpose in life. They do what they enjoy the most, but with out the pressure of eking out a living from it. They are not afflicted by the “Monday morning” syndrome. They enjoy their work as much as they do their favorite hobby. Honestly, how many of us really enjoy our work? Would we still continue to do the same work if god guaranteed us all the money that we require, with out this work? If our answer is a NO, then we need to hasten our journey to quadrant 4 so that we are at peace with ourselves. We can only excel at what we enjoy, not at what we are forced to do due to circumstances. Just imagine a job that you would look forward to and enjoy as much as the live cricket match or the latest blockbuster.

What does it take to move to the 4th quadrant? Some introspection, little foresight, a lot of smart and careful planning, discipline and patience. All of us cannot just jump to quadrant 4 from our present quadrant. It has to be a well planned journey so that we do not outlive our wealth. We have to be absolutely confident that our investments will take care of all our future responsibilities. We have to make our money work hard for us to reach there. It has to be a gradual and careful process. The time needed would depend on individual circumstances. We need to plan our finances and invest wisely so that our investments take over our job of feeding our family, giving us the freedom of pursuing our career of choice and not compulsion. And remember, when we move to the 4th quadrant, we put our finances on auto pilot which can take care of our family even in our absence or disability. We have effectively separated our career and our need for money. We have insulated our family from the ups and downs of our career. So what are we waiting for? Let’s overcome inertia and start moving.

A happy journey to quadrant 4!!

I have got few updates on this famous topic. I mean famous because it is one of the more searched topic in many search engines these days. I am seeing lot of traction on this topic in our website for last few weeks. It exactly shows the enormous amount interest from NRI's in India and all over the world. It is the true witness for the impact of this scheme in a broader sense.

There are many questions floating around the web like,

1. What exactly is NPS?
2. What is the difference between the current Pension schemes offered by few Mutual fund companies and NPS?
3. Why it is so different and why do I need to consider investing in it?
4. When exactly can I start the process?
5. What is the great benefit of NPS?

Above are just few from the big pool which I see everyday. Most of the questions can be answered by checking out our previous NPS blog posted by one of our reputed contributor Sreekant, CFP certificant. He will continue to research and keep us updated on any improvements. I am also periodically watching the news scene to bring latest updates on this topic, this post being one of them.

I also came across a good blog from WSJ which has outlined the key points in a elaborate manner. Do check out the blog at livemint.com. I found another interesting and detail ppt from Punjab bank. Check out this one too.

Whats new on NPS
1. POP, Point of Presence are going to be like distributors where individual can open the account. These are going to banks
2. PFRDA has appointed State Bank of India , UTI, IDFC , ICICI Prudential Life Insurance, Kotak Mahindra and Reliance Mutual Fund as the fund managers for NPS. These players have to set up separate companies to manage the business.
 
Vijai's 2cents

If you want to know my 2cents.  I am all up for a good long term investment idea which is managed properly by an experienced fund manager. Also many NRI's are interested in the scheme to take advantage of the current economy condition and future India growth. This scheme has great potential to bring lot of money to India from all over the world. Invest India Economic Foundation (IIEF), a think tank specialising in pensions, estimates monies worth close to $300 billion by 2019 would invested in these funds. But this scheme is still in early stages. This what I would do.

1. Its new and still lot of things need to be sorted out by PFRDA. So I would say lets wait for the dust to settle down and then jump on it.
2. Election is underway and change in Politics and New Governement can bring some changes to the scheme. Wait for new FM to come aboard and see how he does with this scheme.
3.PFRDA chairman already commented saying, they don't want to advertise a lot now because it goes against EC codes. So they are waiting for the election to get over and start a big campaign to create awareness. 
4. It is not going to get old or too late. But it is the right time to get into these kinda of investing since the market is low. 

So keep checking into the news and we should know the real process of getting into the scheme. 

Happy Investing!!!
 

NPS was launched in the year 2004 by the Indian government as a defined contribution pension system. All employees who joined the Indian government service from 2004 come under this scheme. The previous defined benefit pension system for government employees is a huge financial burden, which the government wanted get relieved of gradually.

NPS is now being made available to the common public from May 2009. Any one can avail himself or herself of this scheme.

THE SCHEME

It is a centrally operated portable pension scheme. Initially there are 23 Points of Presence (POP) consisting of banks and other financial institutions, who act as the front end interface with the public. These POP facilitate account opening and other transactions. NSDL (National Securities Depository Limited) is the Central Record keeping Agency (CRA) and there are 6 fund managers, who will manage the funds. You may open an Individual Retirement Account (IRA) with any of the POP and you will be allotted a unique account number valid for life. So even if you change employer or place of residence, you may continue to operate the same account.

You have the option of contributing monthly or quarterly, but a minimum of 4 contributions in a year is mandatory to inculcate the regular saving habit. There are 3 fund options namely E (Equity), C (Corporate bonds) and G (Government bonds) and you may choose any or a combination of these options to deploy your funds. There is also a default “auto choice” fund which would be a lifecycle fund and the asset allocation would be adjusted according to your age. The equity exposure will be 60% till age 35 after which it will reduce by 3% every year till it reaches zero by age 55. You have the choice of selecting your fund manager and the CRA would transfer your funds to the desired manager.

Initially the NAV (Net Asset Value) will be declared once in a year and you would have the option of changing your fund manager only once a year. The performance of the fund managers will be reviewed every 3 years and replaced if necessary.

The tier 1 account is purely a retirement fund with no withdrawals permitted till age 60. But in case of a critical illness or for the purpose of buying a house, withdrawal is permitted. At the age of 60, you may opt to withdraw up to 60% of the fund as a lump sum and buy an annuity with the rest. There is also a proposed tier 2 account likely to be launched at a later date which would act as a normal investment account, permitting investments and withdrawals at will. But you need to have a tier 1 account if you desire to open a tier 2 account.

Fees and Charges

Account opening charge: Rs.50 per account

Annual maintenance charge: Rs.350 per annum which will gradually reduce to Rs.250 as the number of accounts increases to 30 lakhs.

Transaction charge: Rs.10 per transaction which will gradually reduce to Rs.6 as the number of accounts increases to 30 lakhs.

Fund management charge: 0.0009% per annum on the fund value.
 
Open to NRI

NPS is open to NRI who continue to hold Indian passport. The contribution should be in Indian rupee and the scheme is non-repatriable.

The positives of the scheme

Simple: Once an account is opened, you may continue to contribute till you reach retirement.

Portable: You need not open a fresh account every time you switch employment or residence unlike the present EPF (Employee Provident Fund)

Low cost: NPS offers an extremely low cost retirement plan when compared to the other alternatives. The significance of lower cost will be felt when compounded over a long period of say 15 or 20 years. The following illustration will drive home the benefit of low cost.

Consider the case of an investor who invests Rs.5000 per month for 20 years. With an assumed pre-expense return of 10%, the amount he would receive under NPS and any alternate retirement plan that has a fund management charge of 1% would be:

Tax treatment: The returns are fully taxable unlike EPF and PPF (Public Provident Fund) where the returns are tax free. This obviously looks to be an error and does not sound logical because all similar investment vehicles have to be given the same tax treatment and let’s hope that this would be set right in due course.

Disclosure: Initially the NAV would be declared annually so as to minimize churn between fund managers. Hopefully the disclosure is made more frequently over time enabling better fund manager assessment.
 
What should you do?

Certainly NPS is a good alternative to the investment schemes available right now in India and merits consideration. But stick to your present investment plans for now till there is more clarity on the scheme and the initial hiccups are overcome. I shall update the details once the scheme is up and running.

Check our latest update on this topic posted on 4/30/2009.

Any more questions on this topic, please don't hesitate to ask at our new Q&A section,  Ask All About Money or new website JustAskNRI.com.