The scheme, called Tier II account, may be introduced by the end of this calendar year, a top official of Pension Fund Regulatory and Development Authority (PFRDA) told sources.
“We are working on a pension saving account under New Pension System and is likely to be operationalised by the end of this year,” the Pension Fund Regulatory and Development Authority official said. The essential feature of this saving account would be liquidity. Customers needing money in emergency situations would be able to withdraw their deposited sum.
Essential feature
In this pension saving account, customers can withdraw almost the entire amount, though a small part might be retained with the fund manager, as directed by the interim pension regulator, the official said.
The pension amount withdrawn would be subjected to tax as it is under exempt-exempt mode like the Tier I account. Under exempt-exempt, the amount is exempted from tax when deposited and also when it accrues interest, but tax is levied at the time of withdrawing the amount. “Investment patterns and other guidelines would be the same as applied to Tier I account, which was operationalised from May 1,” the official added.
However, the customers who wants to open the Tier II account should essentially have a Tier I account.
“Those who wants to open the Tier II account must also have Tier 1 account. Both the account should run separately,” he added. Under the New Pension System, a customer can only withdraw 20 per cent of the money as a lump sum before he or she attains 60 years of age.
On attaining 60 years of age the customers can withdraw 60 per cent as lump sum.
Besides the pension-cum-saving scheme, Pension Fund Regulatory and Development Authorityis working on a separate fund management guideline for corporates, a move that will allow them to enter into agreements with fund managers for managing the pension fund of their employees. New Pension Systemwas implemented for government employees who joined service on or after 1 January 2004.
On May 1, it was extended to all citizens. There are six fund managers for all citizens’ scheme-IDFC Mutual Fund, Kotak Mahindra, SBI, UTI Asset Management, ICICI Prudential Life Insurance and Reliance MF.
Besides, there are 21 Points of Presence (PoPs) of NPS, which include, State Bank of India, ICICI Bank, IDBI Bank, Oriental Bank of Commerce, Axis Bank and Union Bank of India.
PoPs are contact and collection points for customers wanting to be part of NPS.
