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NPS to be Unveiled in May

The New Pension System is set for launch

The new pension system (NPS) for the unorganised sector, whose launch was postponed from its earlier date of 1 April, 2009, is reportedly all set to open for business from 1 May, 2009.

Meant for any individiual to start a pension account, it is a way to save up for retirement. The NPS is meant not just for private individuals, it is also applicable to all central government employees who joined service after January 2004.

NPS contributions will be made on the basis of defined contribution.

What has made the NPS so special is its shockingly low cost. While the annual cost of record keeping is Rs 350, each transaction will cost Rs 20.

The record keeper will be the National Security Depository Limited, while six fund managers will run different investment plans like, equity, G-Secs and corporate bonds.

The invevestment management fees is also pegged very low at 0.009 per cent per annum. That means over the long term, the magic of compunding will get a massive role to play in increasing your nest egg.

But, since this is a pension scheme, you cannot withdraw money untill you are 60 years old. And even then you can withdraw just 60 per cent of the corpus, while the rest must be used to buy an annuity. And, the worst news comes last, gains will be taxable. However, experts believe that this will be changed to a tax-free status eventually.

The Pension Fund Regulatory and Development Authority (PFRDA) has indicated that there will be a network of 23 access points for people to open their accounts, including SBI, LIC, Citibank, ICICI Bank, Axis Bank, UTI AMC and others.

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