The Central Government had introduced the National Pension System (NPS) with effect from January 1, 2004 (except for armed forces). Pension Fund Regulatory and Development Authority (PFRDA), the regulatory body for NPS, has appointed NSDL as Central Recordkeeping Agency (CRA) for National Pension System. CRA is the first of its kind venture in India which is carrying out the functions of Record Keeping, Administration and Customer Service for all subscribers under NPS. CRA shall issue a Permanent Retirement Account Number (PRAN) to each subscriber and maintain database of each Permanent Retirement Account along with recording transactions relating to each PRAN.
In NPS, a government employee contributes towards pension from monthly salary along with matching contribution from the employer. The funds are then invested in earmarked investment schemes through Pension Fund Managers.
As per the Gazette Notification dated January 31, 2019 issued by the Ministry of Finance (Department of Financial Services), the Central Government Subscribers w.e.f. April 1, 2019 have the option of selecting the Pension Funds (PFs) and Investment Pattern in their Tier- I account. The Subscriber can choose any one of the available Pension Funds and Investment Option as per their choice. If the choice is not exercised by the Subscriber, NPS contributions would be invested in the existing default schemes of the 3 Pension Fund Managers (PFMs), viz, LIC Pension Fund Limited, SBI Pension Funds Pvt. Limited and UTI Retirement Solutions Limited in a predefined proportion, as mentioned in the Statement of Transaction (SoT), as per the guidelines issued by PFRDA.
The Subscriber can select any one of the investment schemes as mentioned below:
1. Default Scheme – Investments would be done in defaults schemes of LIC, UTI and SBI in a predefined proportion.
2. Scheme G - 100% of contribution shall be invested in Government Bonds and related instruments.
3. Scheme LC 50 - Life cycle fund where the Cap to Equity investments is 50% of the total asset.
4. Scheme LC 25 - Life cycle fund where the Cap to Equity investments is 25% of the total asset.