NPS New Rules: The Pension Fund Regulatory and Development Authority (PFRDA) has said it has decided to stop accepting payments from credit cards for the Tier-2 account of the National Pension System. Through a circular dated August 3, the regulator has asked all points of presence (PoPs) to follow the direction with immediate effect.
“The Authority has decided to stop the facility of payment of subscriptions/ contributions using credit card as a mode of payment in the Tier-II account of NPS. Accordingly, all points of presence (PoPs) are advised to stop the acceptance of credit card as a mode of payment for the Tier-II account of NPS with immediate effect,” the PFRDA said in a statement.
The circular was issued by the PFRDA in exercise of the power conferred under Section 14 of the Pension Fund Regulatory and Development Authority Act, 2013, to project interests of subscribers and to regulate, promote and ensure orderly growth of the National Pension System and pension schemes to which the Act applies.
NPS and Its Account Types
A pension-cum-investment scheme, the NPS was launched by the government in January 2004 to provide old-age security to citizens of India. Initially, it was for government employees. Later, in 2009, it was opened to all sections. It brings an attractive long-term saving avenue to effectively plan your retirement through safe and regulated market-based returns.
NPS can be broadly classified into two categories — government employees and other individuals. All employees of central autonomous bodies who have joined on or after January 1, 2004, are mandatorily covered under the government sector of NPS, whereas any other individual is allowed to voluntarily join NPS since May 1, 2009. Any Indian citizen between 18 and 60 years can join NPS.
There are two types of NPS accounts — Tier 1 and Tier 2. Tier 1 account is primarily meant for retirement savings where one has to contribute a minimum of Rs 500 while opening the account. It also entails tax benefits under Section 80CCD (1B) of the Income Tax Act, 1961.
Under the NPS Tier 1, a person is allowed to withdraw 60 per cent of the accumulated corpus contributed during his/ her working years at the time of retirement, which is tax-free. The remaining 40 per cent is converted into an annuatised product. NPS Tier 2 is an open-access account with a minimum investment of Rs 1,000, where the subscriber is free to withdraw his/ her entire corpus at any point in time. No tax benefits are available in this account.
Risk Rating Mandatory Now
Recently, PFRDA also made it mandatory for fund managers to assign ratings based on the risk level of the NPS scheme. The new rules mandate six levels of risk — Low Risk, Low to Moderate Risk, Moderate Risk, Moderately High Risk, High Risk, and Very High Risk. Based on the scheme characteristics, pension funds shall assign risk levels for the Schemes E-Tier 1, E-Tier 2, C-Tier 1, C-Tier -2, G-Tier-1, G- Tier-2 and Scheme A.