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New Pension Scheme
The government of India (GOI) introduced a New Pension System (NPS) in the year 2003. The NPS is applicable to all new employees to Central Government service, except the Armed Forces, joining Government service on or after 1st January 2004. The States were encouraged to adopt NPS and the majority of the States have already adopted NPS. NPS is also applicable to Central Autonomous Bodies (CABs) and the Autonomous Bodies / Grant Institutions of the States who have adopted NPS. GOI, through a Government ordinance, created Pension Fund Regulatory and Development Authority (PFRDA) to set up, regulate, and develop the NPS.
Under the scheme, the Government will contribute Rs. 1000 per year to each eligible NPS account opened in the year 2010- 11 and for the next three years, that is, 2011-12, 2012-13, and 2013-14. The benefit will be available only to persons who join the NPS with a minimum contribution of Rs. 1,000 and a maximum contribution of Rs. 12,000 per annum Conditions apply.
Under NPS, how your money is invested will depend upon your own choice. NPS offers you a number of fund managers (six) and multiple investment options (three) to choose from. In case you do not want to exercise a choice as regards asset allocation, your money will be invested as per the “Auto Choice” option.
You will be allotted a unique Permanent Retirement Account Number (PRAN). This unique account number will remain the same for the rest of your life. You will be able to use this account and this unique PRAN from any location in India.
- PRAN will provide access to two personal accounts:
- Tier-I pension account: You will contribute your savings for retirement into this non-withdrawable account.
- Tier-II savings account: This is simply a voluntary savings facility. You will be free to withdraw your savings from this account whenever you wish.