Please give all the details about different funds related to pension in NPS.
- What is Tier 1 & Tier 2 accounts?
- Are there any other pension funds/schemes? Do we have information related to comparison of returns, tax criteria?
- Is pension compulsory after maturity?
- What happens to the money after the death? Do dependents get pension and what happens to the principle amount etc. in all the schemes?
- Sunil T
1) At present, Subscriber has option to select any one of the following 8 pension funds: ICICI Prudential Pension Fund, LIC Pension Fund, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund, SBI Pension Fund, UTI Retirement Solutions Pension Fund, HDFC Pension Management Company and DSP Blackrock Pension Fund Managers.
2) NPS offers two types of accounts: Tier I and Tier II. A subscriber can contribute his savings, including the contribution from his employer, for retirement into a non-withdrawable Tier I account. Tier II account, on the other hand, is a voluntary savings account and subscribers are free to withdraw the money from it whenever they want. An active Tier I account is a must to open a Tier II account.
3) All insurance companies and some mutual funds offer pension/retirement schemes that qualify for a tax deduction under Section 80C of the Income Tax Act. For example, there are two pension schemes offered by mutual funds: UTI Retirement Benefit Pension Fund and Franklin India Pension Fund. Reliance Mutual Fund and HDFC Mutual Fund also offer retirement schemes. You can check the performance of these schemes on our website.
4) You must use at least 40 per cent of the accumulated corpus in National Pension Scheme (NPS) to buy an annuity from a life insurance company. You can withdraw the rest of the corpus on maturity.
5) You will have several choices while buying annuity. Choose the option that appeals to you.
Here are some generic annuities offered by Annuity Service Providers. However, some of the ASP's may offer some variants which have slightly different or combination type of annuities.
- Pension (Annuity) payable for life at a uniform rate to the annuitant only.
- Pension (Annuity) payable for 5, 10, 15 or 20 years certain and thereafter as long as you are alive.
- Pension (Annuity) for life with return of purchase price on death of the annuitant (Policyholder).
- Pension (Annuity) payable for life increasing at a simple rate of 3% p.a.
- Pension (Annuity) for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
- Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
- Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant and with return of purchase price on death of the spouse. If the spouse predeceases the annuitant, payment of annuity will cease after the death of the annuitant and purchase price is paid to the nominee
This article was originally published on February 09, 2016.
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