If you are a new-age retirement corpus building investor, who likes his investing to be done at the click of a mouse and thinks that cheque books are for the geriatric, then your basket of choices just got bigger. Another online platform has started offering the New Pension System (NPS). Earlier, FundsIndia.com, an investment portal, was the first to offer it online. Now, ICICIdirect.com, the online broking site of ICICI Securities Ltd, is offering it online.
What is NPS?
It is a pure defined contribution product, where you invest till the age of 60 years. You can begin with a minimum annual contribution of Rs 6,000 and your money gets locked in till 60 years of age. At 60, you need to buy an annuity, a pension product that gives you periodical payouts, with 40% of the proceeds. The remaining can be taken as lump sum.
Currently, NPS has two accounts. The tier I account is the basic one that works strictly like a pension product. You can start investing from the age of 18 years and your money gets locked in till you are 60 years. Tier II account works more like a savings account, which gives you the flexibility to withdraw any time.
You can choose the fund, the fund manager as well as an investment strategy to suit your needs. You can choose from three funds: equity in which you can put up to 50% of your investment, fixed income instruments other than government securities and government securities. While the active choice lets you invest freely in any of these funds, auto choice does an automatic lifecycle-based investing. It begins with a maximum exposure to equity at 50% till the age of 35 years and tapers it off to 10% by age 55.
You can choose among six fund managers: ICICI Prudential Pension Funds Management Co. Ltd, IDFC Pension Fund Management Co. Ltd, Kotak Mahindra Pension Fund Ltd, Reliance Capital Pension Fund Ltd, SBI Pension Funds Pvt. Ltd and UTI Retirement Solutions Ltd.
How to invest online
Currently, you can invest in the basic tier I account through ICICIdirect.com. For this, you need to have an account with ICICIdirect.
At the time of registering yourself for NPS, you don’t have to go through any know-your-client processes since that gets done at the time of opening your account with the portal. You can then choose your investment strategy and fund manager and track your net asset value daily. Says Vineet Arora, head (product and development), ICICI Securities: “Currently, we direct the investors to the website of the CRA (central record-keeping agency) of the NPS. This will help them track the performance of their funds.”
Since ICICI Securities is a designated point of presence, it charges an upfront fee of Rs 40 and Rs 20 subsequently for every transaction.
FundsIndia.com is not a designated distributor of NPS but has tied up with IL&FS Securities Services Ltd, a point of presence. This investment portal, too, does not charge over and above the distributor’s fee from the customer though it also offers tier II account.