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National Pension Scheme – Options & Applicable Charges

By Bhavesh Mehta - May 8,2019
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If you are weighing your investment options and exploring returns on investment and tax-saving options, you would have come across the National Pension Scheme (NPS). The NPS investment option available on the Finserv MARKETS platform (powered by Myway) follows the following fees-related guidelines during the execution of customer’s investment requirements:

  • The applicant has to pay a one-time account opening fee for issuance of Permanent Retirement Account Number (PRAN): Rs. 50
  • Subscriber registration and contribution upload: Rs. 40
  • Upfront charges: Rs. 2
  • Maintenance charges (Annual): Rs. 350
  • Cost per transaction or deposit: Rs. 10
  • Custodian charge (Annual): 0.0075-0.05% of the fund value
  • Fund management charge (Annual): 0.0009% of the fund value
Intermediary Charge head Service charges Method of Deduction
Central record Agency (CRA) PRA Opening Charges Rs. 50 Through cancellation of units at the end of each quarter
Annual PRA Maintenance per account Rs. 190
Charge per transaction Rs. 4
Point of presence (POP) Maximum permissible charge for each customer Initial subscriber registration Rs. 100 To be collected upfront
Initial contribution upload 0.25% of the initial contribution amount Min: Rs 20 & Max: Rs 5000
Any subsequent transaction involving contribution upload 0.25% of the contribution, Min: Rs. 20 & Max: Rs 25000
Transaction (others) Rs. 20

Source: NPS official website. (Service tax & other levies, as applicable, will be levied as per the existing tax laws)

The charges are applicable to both corporate (non-government sector) as well as individual subscribers. For government employees, the charges associated with Tier I account are paid by the government.

In case of a private sector employee, subscribing to NPS via the employer, the associated charges have to be borne by the employer. Similar charges are also applicable for individual subscribers. For Tier II account, activation charges and transaction charges are to be paid by the subscriber.

Details related to NPS investments:

  • Investment: Initial contribution (along with the subscription application) is Rs. 500
  • amount to be deposited (annually): Rs. 6,000
  • Returns: Not assured
  • Protection of capital: NPS offers complete protection of capital
  • Protection against inflation: The NPS is a market-linked product which does not guarantee returns or inflation protection. NPS offers different kinds of fund options with varying exposure to equity instruments, corporate debt, fixed income instruments and government securities. The allocation of funds in the NPS scheme is done after considering a number of parameters.

Ways to Invest in NPS (on the Finserv MARKETS platform) –

  • Aggressive option: Investment will have a higher allocation in equities, in the form of Index funds with a capping of 50%.
  • Moderate (Low risk): Provides moderate risk and reward with the allocation of the investment in debt funds and securities. In addition, partial exposure may be given to government securities.
  • Safe option: Provides low risk and moderate returns with the allocation heavily inclined towards government securities & minor allocation elsewhere to ensure moderate returns.
  • Final option (Default): The question of ‘where to invest money’ is addressed after considering personal factors of the investors, such as age. A young investor, with higher risk appetite, may have a higher allocation in equities to reap the benefits of a possible high return on investment. However, the allocation will be shifted towards less risky options such as bonds and fixed income as the age of the customer increases. Risk appetite decides the asset allocation option in this case.

Therefore, in trying to figure out how to invest money in long-term investment plans, NPS is an option to consider. It is a great solution for retirement planning since it provides old age income with reasonable market-based returns.

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