What is NPS - New Pension Scheme for Bank/Insurance Employees - All You Need To Know

NPS ( New Pension Scheme )  is applicable from year 2004 for all Government Employees(central government & public sector units) and many State Governments have also implemented the same.  But due to the unions' unacceptance initially, it is only applicable for all  Public Sector Bank/Insurance Employees recruited after 2010.

Now let’s get to know more about NPS - New Pension Scheme.

There are total seven fund managers to manage our NPS funds.

See Also: Everything You Need to Know About NPS - Part 1

1. HDFC Pension Management Company Ltd.
2. ICICI Pension Fund Management Company Ltd.
3. Kotak Mahindra Pension Fund Ltd.
4. LIC Pension Fund Ltd.
5. Reliance Capital Pension Fund Ltd.
6. SBI Pension Funds Pvt Ltd.
7. UTI Retirement Solutions Ltd.

Tier I :  This is the compulsory contribution from each individual employee and also the matching grant from employer ( In case of Bank/Insurance Employees, the contribution towards NPS is 10% of our Basic plus DA and an equal contribution from company )

Tier II : Its purely voluntary in nature. You can invest over and above compulsory contribution.

Further, Each Tier has 3 different Assets to be invested in

E:  EQUITY  ( Max 50% of available funds )

C: Corporate Bonds

G: Government Securities

And each Subscriber can choose Fund Manager and also the asset class ( Active Choice )to be invested in. But fortunately or unfortunately this option is not yet provided to members. Only Auto Choice is provided.

Auto Choice for different employees is as follows

For Central Government  Employees:  Funds collected from subscribers are allotted to three Public Sector Pension Fund Managers i.e  SBI, UTI and LIC.

For Corporate Employees ( Including Public Sector Bank’s) : Government has given a choice to the  banks to decide investment choice either at subscriber Level or at the Bank level on behalf of all the employees.  Even the allocating the funds amongst the three asset classes can be decided by the bank.

Now here is the catch, nobody so far bothered to know where the funds are invested, which fund house is managing them, in which asset class they are invested in  and which fund house has given the best return.

We should admit that we as bankers are poor in managing our own personal finance, but this NPS invest has to be taken seriously.

Let’s analyze the maturity value at different ROI.   Assuming that contribution of Rs.3000/- ( And another 3000/- contribution by the bank ) is made towards NPS the following are the different scenarios

                                                                                                                      Amount In Lacs

                                                                                                        Remaining years of Service ( Contribution to be Made )

ROI	25 Years	30 Years	35 Years
8%	56	89	136
10%	79	134	224
12%	111	206	377

As you can see a 2% increase on investment is more than  one Crore for a 25-year old employee.  Further,  the longer you work in the bank the more fund you can accumulate.  This is called the power of compounding. Many people must have read about it in Maths class.

The detailed performance of each fund house is as follows

Under Tier I Scheme E Click here Tier I Scheme E-I

Under Tier I Scheme C Click here Tier I Scheme C-I

Under Tier I Scheme G Click here Tier I Scheme G-I

Summary of performance Since Inception

	SBI	LIC	UTI	ICICI	RELIANCE	KOTAK	HDFC
Equity	11.4	—	13.96	14.68	13.38	12.80	—
Corporate	11.5	—	9.75	11.25	9.44	11.2	—
Government	10.44	—	8.77	9.11	8.40	8.71	—

Total Assets managed by each fund is as follows

	SBI	LIC	UTI	ICICI	RELIANCE	KOTAK	HDFC	TOTAL
Equity	376	42	34	129	26	26	16	649
Corporate	260	25	22	86	16	19	11	439
Government	526	20	33	98	23	25	13	738
TOTAL FUNDS	1162	87	89	313	65	70	40	1826

Majority of the funds are managed by SBI Pension Fund and Majority of the contributions are parked in Government Securities.   We can simply assume that safety is the first priority.

Just analyze your NPS statement and compare your returns with other fund managers.   If your fund is under performing put pressure on your bank to change the fund manager or demand for Active Choice instead of Auto Choice.

Unions and associations have to play a Major Role in this.  Educate the Young Lot.   Just one bad decision can make their  fund shrink from  3.77 cr to 1.36 cr.

NPS is the one of your prime investment take care of it.  Spend some time to discuss and take wise decisions.

Just one bad decision by bank employees by not opting for Pension has cost us one Bipartite.  All the Best. If you have any query regarding NPS, you can drop me a comment.