Did you know | There is a new NPS option for companies

The new scheme will be available from next month
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First Published: Thu, Oct 25 2012. 07 44 PM IST
Updated: Thu, Oct 25 2012. 07 59 PM IST
There is a new scheme called the corporate central government scheme under the National Pension System (NPS). This scheme is meant for companies who want to invest, for their employees, through pension fund managers in pension funds tailored for government employees. The new scheme will be available from next month.
How companies invest in NPS
Presently, companies can invest in NPS either by choosing the private sector NPS or the government NPS. Both these schemes have the same architecture and design but differ in investments and pension fund managers. Private NPS currently has six fund managers and three funds called asset class E that invests in equity, asset class C that invests mainly in corporate bonds, and asset class G that invests in government bonds. As per the investment norm, an investor can’t put more than 50% of the money in equities.
But in case of the government NPS, which is handled by three fund managers and the corpus is divided among them, the equity investment is restricted to 15%. Do note that while investment in equity in case of private NPS is only through index funds, government scheme can invest in equity directly or through mutual funds.
The new option
But now, the Pension Fund Regulatory and Development Authority has allowed the private NPS fund managers to increase fund management charge (FMC) up to 0.25%.
In order to allow government pension funds to charge the same FMC to companies, the regulator has proposed a new scheme called corporate central government scheme. The investing company will have to choose the fund manager and the corpus will no longer get divided among the three fund managers namely LIC Pension Fund Ltd, SBI Pension Funds Ltd and UTI Retirement Solutions Ltd.
Tax benefit
Around 10% of your basic salary plus dearness allowance, that is contributed to NPS, is eligible for a tax deduction under section 80CCD of up to Rs.1 lakh. However, if your employer also chooses to contribute to your account then contribution equal to 10% of your basic salary plus dearness allowance is deductible in your hands under section 80CCE.
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First Published: Thu, Oct 25 2012. 07 44 PM IST
More Topics: NPS | tax | corporate | pension scheme |
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