NPS Swavalamban Scheme

There was a query from one of our Blog Readers who wanted to know about the NPS Swavalamban Scheme. Since it is a detailed topic in itself, I thought, it would be more useful if I write a separate article instead of just responding to the comment as a reply comment. So, here we go!!!

What is the Swavalamban Scheme?

The Swavalamban Scheme is a sub-scheme under the NPS Scheme which we covered in great detail in our blog. This scheme is applicable to all citizens of India who are in the unorganized sector & meet the eligibility criteria, who join the NPS in the year 2010-2011. Under this scheme, the Central Government will contribute Rs. 1000 per year to each NPS account opened in the year 2010-2011 and for the next 3 years 2011-12, 2012-13 and 2013-14. To benefit the citizens who opened their accounts in 2009-10, the government has declared that, they will also be entitled to the benefit of the Swavalamban scheme, that is if they meet the eligibility criteria.

What is the Eligibility Criteria?

There are two important criteria:

1. The citizen must belong to the unorganized Sector and
2. The citizen must make a minimum contribution of Rs. 1000 and a maximum contribution of Rs. 12000 per annum for both the Tier 1 and Tier 2 accounts taken together.

Though the second eligibility criterion is very simple, the 1st one is a bit confusing, isn’t it?

What is the Unorganized Sector?

For the purpose of this scheme, a person will be considered as belonging to the unorganised sector if that person:

1. Is not in regular employment of the Central or a state government, or an autonomous body/ public sector undertaking of the Central or state government having employer assisted retirement benefit scheme, or
2. Is not covered by a social security scheme under any of the following laws:
       a. Employees’ Provident Fund and miscellaneous Provisions Act, 1952
       b. The Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948
       c. The Seamen’s Provident Fund Act, 1966
       d. The Assam Tea Plantations Provident Fund and Pension Fund Scheme Act, 1955
       e. The Jammu and Kashmir Employees’ Provident Fund Act, 1961

So, if you meet the above 2 criteria and are eligible, you can get Rs. 1000/- for 3 years, which is Rs. 3000/- in all as an extra motivation to invest in this scheme.

Who gives this extra money?

Of course, the Government of India gives …

Why is the Government doing this?

Since this scheme is aimed at being a retirement corpus for the citizens of India, the government has to motivate the people to join it and what better motivation than giving some extra money to the common investor?

What if someone doesn’t meet the eligibility criteria but still applies for it?

If someone doesn’t qualify for this benefit but still claims falsely that he/she is eligible and applies for this scheme, the government reserves the right to reclaim the money credited to their account along with interest & any penalties for providing false information.
Hope this covers enough info about the Swavalamban Scheme. If you need any other info, you know what needs to be done…

Just leave a comment and I will see what I can do.

Happy Retirement!!!

National Pension Scheme (NPS) - All your Questions Answered!!!

In the previous chapter, we saw what the National Pension Scheme or the New Pension Scheme is and what the purpose of that scheme is. By the end of the chapter, you would have got a few or rather a lot of questions related to the scheme. If you had, don't worry about searching the internet for the answers because, this chapter is going to do it for you.

So, lets get started!!!

1. Who can invest in NPS?

Any Indian citizen between the age of 18 to 60 years can invest in NPS. However, persons having an existing NPS account and government employees who are already covered under NPS cannot again open an additional account under NPS.

2. Can an NRI open an NPS account?

Yes. An NRI can open an NPS account if the NRI has a bank account with a bank based in India. Contributions made by NRI are subject to regulatory requirements as prescribed by RBI and FEMA from time to time.

3. What if my citizenship status changes after I open a permanent retirement account under NPS?

NPS is available only to citizens of India. If the subscriber's citizenship status changes, his/ her NPS account would be closed.

4. If I have invested in any other Provident Fund, can I still invest in NPS?

Yes. Investment in NPS is independent of your contribution to any Provident Fund.

5. I have invested in pension funds of non government / private entities. Can I still invest in NPS?

Yes. Investment in NPS is independent of your subscription to any other pension fund. It is a purely voluntary scheme and the investor can make the decision to choose the NPS or any other private entity that provides pension schemes (like ICICI or HDFC)

6. Are there any online trading websites that provide NPS Subscription facilities?

Per my knowledge, ICICI Direct website provides this facility

7. What is PRAN?

PRAN stands for Permanent Retirement Account Number. Every individual who invests in the NPS will be allotted a PRAN.

8. How will I know my PRAN?

After your NPS / permanent retirement account is opened, CRA will intimate you about your PRAN by issuing a PRAN allotment letter.

You will also receive a Telephone Password (TPIN) and Internet Password (IPIN). The TPIN can be used to access your NPS account on the call centre number of CRA (1800222080). While your IPIN can be used to access your account on CRA website (www.npscra.nsdl.co.in) on a 24 x 7 basis.

9. Are there any conditions for making contributions to the NPS account?

Yes. PFRDA has specified the minimum contribution that is to be made in a financial year for each type of NPS account. Further, you are required to make your first contribution at the time of applying for registration with a Point of Presence (POP).

Additionally, the following conditions apply for each of the below accounts.

Tier I:
Minimum amount per contribution - Rs. 500 /-
Minimum contribution per year - Rs. 6,000/

Tier II:
Minimum amount at the time of account opening - Rs. 1,000/-
Minimum Amount per contribution - Rs. 250/-
Minimum Balance to be maintained at the end of the Financial Year - Rs. 2,000/-

You may decide on the frequency of your payments during the year as per your convenience. Further, you may also contribute the entire minimum contribution amount as detailed above at the time of registration itself.

10. Will the government also contribute anything to my NPS account?

No. The Government will not be making any contribution to your NPS account.
The Government of India may however, make contributions to the accounts of NPS account holders who opt for Swavalamban scheme subject to conditions stated in Swavalamban scheme. (The details of the Swavalamban scheme is out of scope for this article and we shall look into it in future)

11. What will happen if I do not make the minimum contribution during any financial year?

If you do not make your minimum contribution during any financial year, your account would go into “Defaulted” status.

In case of a default:

You will have to pay a default penalty of Rs. 100 per year of default and further CRA will mark your NPS account as dormant on the last date of that financial year.
To reactivate your account, you will have to pay the aggregate of the outstanding amount of the minimum contribution due for each year that your account is dormant and the applicable penalty amount per year. For instance, if your account has become dormant due to non payment of minimum contribution and you have already contributed say Rs. 3000/- during the year to your NPS account. Now, to reactivate your account, you will have to contribute the outstanding minimum contribution ie Rs. 6,000/- less Rs. 3000/- = Rs. 3000/- plus penalty of Rs. 100/-

A dormant account shall be closed when the value falls to zero.

The fee structure may change as may be decided by the PFRDA/ NPS Trust from time to time.

12. Is there any maximum age limit for making further contribution to NPS Tier I Account?

Yes. You can make contribution in your NPS accounts only till you have not completed the age of 60 years. After attaining 60 years of age, you will not be permitted to make further contributions to the NPS accounts.

13. Can I transfer my savings amount from NPS Tier II account to NPS Tier I account or vice versa?

No. You cannot transfer savings from one NPS account to the other.

14. How do I pay the charges or fees applicable to my NPS transactions?

The charges applicable on your NPS transactions and service tax amount payable thereon shall be deducted from your contribution amount and the balance amount will be invested in your NPS account.

Note: Details of the fees payable for investments can be found in the NPS offer document. This fees are subject to change from time to time by the PFRDA and will be intimated to the investors.

15. How do I select the Pension Fund Manager for my NPS savings?

You can select your Pension Fund Manager at the time of applying for the NPS Scheme. The list of available fund managers is available in my previous article and you can refer to it by clicking here


16. Can I select more than one PFM to manage my savings?

No. You can select only one PFM.

17. What is meant by Investment Choice?

Investment Choice refers to the feature by which the subscriber specifies the manner in which his contribution is to be invested. The contributions made by you towards the NPS account shall be invested by the Pension Fund Manager based on the asset class allocation given by you, and the value of the pension corpus shall be totally based on the NAV of the schemes. You can choose, equities or government securities etc. Details of the different investment choices can be seen in the NPS offer document (And in the next question… Did you think I will let you search for it )

18. What are the various investment choices available in NPS?

The following two investment choices are available in NPS:

(I) Active Choice - Individual Funds (Asset class E, Asset class C and Asset class G) and
(II) Auto Choice - Lifecycle fund

In Active choice, you have the option to actively decide as to how your NPS Pension wealth is to be invested in the following three asset classes:

Asset Class E - investments in equity market instruments
Asset Class C - investments in fixed income instruments other than Government securities
Asset Class G - Investments in Government securities

You will be able to choose from the below-mentioned basket of investment choices:

Equity (Asset Class "E") with a maximum asset allocation of 50% and remaining 50% which can be allocated from Asset Class C and/or Asset Class G

Fixed Income Instruments other than Government Securities (Asset Class "C") with maximum asset allocation of 100% (if allocated singly)

Investment in Government Securities (Asset Class "G") with maximum asset allocation of 100% (if allocated singly)

The overall asset class allocation under the 'Active Choice' option should be equal to 100%

In the Auto Choice option, your funds will be invested across various asset classes in a lifecycle fund as per a pre defined portfolio wherein the Pension Fund Manager shall invest your contribution based on the asset allocation table formulated by PFRDA (based on your age group).

19. Can I select both investment choices when investing in NPS?

No. You have to select either Active Choice or Auto Choice as your option when making investments under NPS. You cannot choose both…

20. Can I change my investment choice?

Yes, you can change your Investment Option [Active or Auto]. After all, it’s your money and you can choose how it is invested.

However, these changes can be made only during the period as specified by CRA / PFRDA. PFRDA will announce the period (from and to dates) during which you can make the said changes.

21. What rate of return will my contributions earn?

There is no guaranteed or suggested rate of returns. The returns earned by your investment would depend on the type of assets you chose to invest and the market performance.

The PFM will invest your savings in a scheme of your choice. Remember that your investment allocation is one of the most important factors affecting the growth of your pension wealth. The rate of return earned by your contribution depends on the return provided by the asset classes you choose to invest in viz equity instruments, fixed income instruments , government securities.

The returns earned by the PFM on the scheme selected by you will be credited to your account.

22. Can I register for NPS without indicating any investment option?

No. You will not be able to register for NPS, unless you have indicated your Investment choice.

23. What is meant by Life Cycle fund in the Auto Choice option?

NPS offers an easy investment option, called "Auto Choice", to assist those customers who do not have the required knowledge to manage their NPS investments.

Under this Option, the investments will be made in a life cycle fund whereby the allocation across various assets will be defined as per your age and will be readjusted as you grow older. When you are younger a higher portion of your funds will be invested in equities and as you grow older, the exposure to equities will be reduced and the exposure to debt instruments will be increased.


24. Can I change the Pension Fund Manager for my pension savings?

Yes, you can change your Pension Fund Manager.

However, as for question 20, this change can be done only in specific timeframe and not all the time.

25. Can I have a different Pension Fund Manager and Investment Option for my Tier I and Tier II account?

Yes. You may select different PFMs and Investment Options for your NPS Tier I and Tier II accounts.

26. Who are the Annuity Service Provider for NPS accounts?

PFRDA is in process of appointing the Annuity Service Provider(s) for the NPS accounts. Upon appointment of the same, you will be able to select any Annuity Service Provider for your account as per your choice at the time of withdrawal of contribution from your NPS Tier I account or on attaining 60 years of age.

As of now, they are not yet appointed/finalized.

27. Where can I view my unit holdings held in the NPS account?

You can view your unit holdings by logging on to the CRA Website. https://cra-nsdl.com/CRA/ using the IPIN provided by CRA.

28. Will I receive a transaction statement on allotment of units in my NPS account?

Yes. An annual statement containing details of your unit holdings will be issued by CRA to your registered address within 3 months of the end of every financial year.

29. Are there any conditions / formalities to be completed for withdrawing money from my NPS Tier I account?

Yes. Following are the conditions stipulated by PFRDA for withdrawing funds from the NPS Tier I account:

On attaining age of 60 years and upto 70 years of age

On exit, you would be required to compulsorily invest atleast 40 % of your accumulated savings (pension wealth) to purchase a life annuity from any IRDA - regulated life insurance company.

You may choose to purchase an annuity for an amount greater than 40%. The remaining 60 % of your pension wealth can either be withdrawn in lump sum on attaining the age of 60 or in a phased manner, between age 60 and 70, at the option of the subscriber.

In case you opt for phased withdrawal, please note:
1. Minimum 10% of the pension wealth should be withdrawn every year
2. Any amount lying to the credit at the age 70 should be compulsorily withdrawn in lumpsum

Death due to any cause In such an unfortunate event, option will be available to the nominee to receive 100% of the NPS pension wealth in lump sum. However, if the nominee wishes to continue with the NPS, he/she will have to subscribe to NPS individually after following due formalities.

Update - As of 12th June 2013:

As per some latest developments 60% of your corpus can be withdrawn in One Lumpsum. You need not do the phased withdrawal as explained above. I am retaining this old answer as well just to show how the NPS policies change over time to benefit us...

30. What will happen to my savings if I decide to retire before age 60?

To withdraw from your Tier I account at anytime before 60 years of age, you would be required to invest atleast 80% of your pension wealth to purchase a life annuity from any IRDA - regulated life insurance company. You may withdraw the remaining 20% of your pension wealth as a lumpsum.

31. Can I appoint nominees for the NPS Tier I Account?

Yes. You can appoint upto 3 nominees for your NPS Tier I account.

You are required to specify the percentage of your saving that you wish to allocate to each nominee. The share percentage across all nominees should collectively sum up to 100%.

32. I have not made any nomination at the time of registration. Can I nominate subsequently?

If you have not made the nomination to your NPS account at the time of registration, you can do the same after the allotment of PRAN.

33. Are there any charges for making a nomination?

If you are making the nomination at the time of registering for PRAN, no charges will be levied to you.

However, a subsequent request for nomination updation would be considered as a service request and you will be charged an amount of Rs. 20/- plus applicable service tax for each request.

34. What is the transmission process to be followed by a nominee in case of death of the NPS account holder?

Incase of the death of the NPS account holder, the nominee(s) may opt to receive 100% of the NPS pension wealth of the deceased NPS account holder in lump sum or may continue with NPS .

In case the nominee (s) opt to withdraw the pension wealth, the nominee (s) are required to submit the withdrawal request to CRA directly with the supporting documents specified in the withdrawal request form.

However, if the nominee wishes to continue with the NPS, he/she will have to subscribe to NPS individually after following due account opening formalities.

35. What is the transmission process in case of death of NPS account holder who has not selected a nominee?

It is advisable that the NPS subscribers indicate their nominee. CRA is in the process of defining the procedure for transmission in case of NPS account holders who have not selected a nominee.

36. Can I raise my queries or complaints directly with CRA?

Yes. The NPS also has a multi layered Grievance Redressal Mechanism which is easily accessible, simple, quick, fair, responsive & effective. You can register your grievance / compliant by calling at the CRA call centre or by registering the grievance on www.npscra.nsdl.co.in.

You will have to authenticate yourself through the use of T-PIN (in case of call centre) /I-PIN (while registering on the site) allotted to you.

On successful registration of your grievance, a token number will be allotted to you for all future references.

37. How can I track the status of resolution of my grievance that I have registered with CRA?

You can check the resolution status of your grievance by logging in to the CRA website www.npscra.nsdl.co.in

If you have raised your grievance through CRA, you may contact the CRA Call Center and enquire about the resolution of your grievance by mentioning the token number. You can also raise reminder through any one of the modes mentioned above by specifying the original token number issued.

38. What can I do if I do not get a response from the CRA?

If you do not receive any response with in 30 days or are not satisfied with the resolution provided by CRA, you can apply to the Grievance Redressal Cell (GRC) of PFRDA

Grievance received by the GRC, directly from the subscribers only shall be entertained. GRC shall not entertain any complaints written on behalf of the subscribers by advocates, agents or third parties unless formally authorized by the subscriber.

Complete address of the GRC of PFRDA is:

Grievance Redressal Cell
Pension Fund Regulatory and Development Authority
1st Floor, ICADR Building, Plot No. 6, Vasant Kunj,
Institutional Area, Phase - II, New Delhi - 110070,
Tel: 011-26897948-49, FAX: 011-26892417,
Email: grcpfrda@gmail.com


Hope this article was able to answer most of your queries related to the NPS. If you have any further queries, don't hesitate to leave a comment and I will see what I can do 

Happy Retirement!!!