Operational Guidelines and its applicability for NPS- New Pension Scheme..

The Government of India has approved the Operational Guidelines for the Swavalamban Scheme which was announced in the Finance Minister’s Budget speech of 2010-11. The Scheme is applicable to all citizens in the unorganised sector who join the New Pension Scheme (NPS) subject to their meeting the eligibility criteria. Under this Scheme, Central Government will contribute Rs.1000 per year to each NPS account opened in the year 2010-11 and for the next 3 years, i.e., 2011-12, 2012-13 and 2013-14. To be eligible, a person will have to make a minimum contribution of Rs. 1000 and maximum contribution of Rs.12000 per annum, for both Tier-I and Tier-II accounts taken together.

 

2. In recognition of their faith in the NPS, all NPS accounts opened in the year 2009-10 will also be entitled to the benefit of Swavalamban, subject to fulfillment of the eligibility criteria. A person will have the option to join the NPS as an individual as per the existing scheme or through the CRA Lite approved by PFRDA. The exit from the Swavalamban Scheme would be on the same terms and conditions on which exit from Tier-I account of NPS is permitted and will be subject to the condition that the minimum pension out of the accumulated pension wealth would be Rs. 1000 per month, in accordance with the provisions of Operational Guidelines.

 

3. The Scheme will be funded by grants from the Government of India.

 

 

The scheme will be called Swavalamban Yojana. It will be applicable to all citizens in the unorganised sector who join the New Pension System (NPS) administered by the Interim Pension Fund Regulatory and Development Authority (PFRDA).

 

Benefits under the Scheme

Under the scheme, Government will contribute Rs. 1000 per year to each 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 maximum contribution of Rs. 12,000 per annum.

 

Definitions:

Unorganised sector: For the purpose of this scheme, a person will be deemed to belong to the unorganised sector if that person: 

• 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
• is not covered by a social security scheme under any of the following laws:
• Employees’ Provident Fund and miscellaneous Provisions Act, 1952
• The Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948
• The Seamen’s Provident Fund Act, 1966
• The Assam Tea Plantations Provident Fund and Pension Fund Scheme Act, 1955
• The Jammu and Kashmir Employees’ Provident Fund Act, 1961

 

All other definitions as given in the NPS offer document will apply to the terms used in this scheme.

 

Eligibility:

The scheme will be applicable to all persons in the unorganised sector subject to the condition that the benefit of Central Government contribution will be available only to those persons whose contribution to NPS is minimum Rs.1,000 and maximum Rs. 12,000 per annum, for both Tier I and II taken together, provided that the person makes a minimum contribution of Rs. 1000 per annum to his Tier I NPS account.

 

As a special case and in recognition of their faith in the NPS, all NPS accounts opened in 2009-10 will be entitled to the benefit of Government contribution under this scheme as if they were opened as new accounts in 2010-11 subject to the condition that they fulfill all the eligibility criteria prescribed under these guidelines.

 

Funding

The scheme will be funded by grants from Government of India. The grants would be given such that monthly payment in the subscriber account would be possible.

Operation

 

A person will have the option to join the NPS as an individual as per the existing scheme or through the CRA Lite approved by PFRDA.

 

At the time of joining the NPS the subscriber will have to declare whether he/she falls within the definition of unorganised sector as defined in para 3 above and would also declare that his contribution would range between Rs. 1,000 to Rs. 12,000 per annum. If subsequent to opening the NPS account it is found that the subscriber has made a false declaration about his eligibility for the benefits under this scheme or has been wrongly given the benefit of government contribution under this scheme for whatsoever reason, the entire government contribution will be deducted along with penal interest as may be specified from time to time.

 

If the status of the subscriber changes to ineligible after joining the NPS, he/she should immediately declare so and the benefit of government contribution will not accrue to the subscriber’s account after the date on which the subscriber becomes ineligible.

 

At the end of each financial year the CRA will, by 7th April of the following year, send to the PFRDA details of the NPS accounts opened during the year, showing separately the number of eligible NPS accounts in which the subscriber’s contribution has been between Rs. 1,000 and Rs. 12,000. CRA will also send these details with individual PRAN to the Trustee Bank.

 

The exit from the Swavalamban Scheme would be on the same terms and conditions on which exit from Tier-I account of NPS is permitted, that is, exit at age 60 with 40% minimum annuitisation of pension wealth and exit before age 60 with 80% minimum annuitisation of pension wealth.

 

However, the exit would be subject to the overriding condition that the amount of pension wealth to be annuitised should be sufficient to yield a minimum amount of Rs. 1,000 per month. If the annuitised pension wealth does not yield an amount of Rs. 1,000 per month, the percentage of pension wealth to be annuitised would be increased so that the pension amount becomes Rs. 1,000 per month, failing which the entire pension wealth would be subject to annuitisation. This minimumpension ceiling may be revised from time to time.”

 

Miscellaneous

12. PFRDA may permit members of an existing pension scheme to migrate to NPS under such terms and conditions as may be approved by the Government.

 

Source - Assettreat