National Pension System: NPS Corporate can provide same benefits as government model; Know features, how to subscribe

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Updated: Sep 26, 2019 4:55 PM

In order to allow non-government employees to get pension benefits similar to new government employees, NPS – Corporate Sector Model was launched in December 2011 by PFRDA.

National Pension System, NPS, New Pension Scheme, Corporate NPS, NPS – Corporate Sector Model, benefits of Corporate NPS, how to join Corporate NPS, Employees Provident Fund, EPF, pension fund, retirement corpusThe corporate model of NPS also allows co-contribution by both employee and employer.

The aim of launching the National Pension System (NPS) was to provide pension to government employees, who joined their services on or after January 1, 2004. Previously known as New Pension Scheme, it was reserved only for government employees initially and subsequently, it was opened for general public from May 1, 2009 to allow individuals in the age group of 18-60 years to invest in Tier-I and Tier-II accounts of NPS.

In order to allow non-government employees to get pension benefits similar to government employees, who joined their services after December 31, 2003, NPS – Corporate Sector Model, which is also called Corporate NPS, was launched in December 2011 by Pension Fund Regulatory and Development Authority (PFRDA).

Like Employees Provident Fund (EPF), the corporate model of NPS also allows co-contribution by both employees and employers of private as well as public sectors. To build retirement corpus, 10 per cent of an employee’s salary (basic+DA) is deducted every month and contributed to his/her Corporate NPS account, and the employer also makes equal co-contribution.

Benefits of Corporate NPS

Low cost: NPS has lower administrative costs compared to other investment options, which benefits the subscribers. Moreover, the employers may get rid of record-keeping hassles for pension purpose.

Flexibility: Either the employer or the employees can choose a Pension Fund Manager for the employee’s corporate NPS account and the employees have the flexibility to choose the proportion of debt and equity from the options given or may choose auto option, in which the portion of equity automatically gets reduced as the age of subscribers increase.

Tax benefit: Employees can tax benefit up to Rs 1,50,000 in a financial year u/s 80C of the Income Tax Act on self-contribution of 10 per cent of salary. The corporates can also claim tax benefits on employer’s matching contribution by showing the amount contributed to NPS as ‘Business Expense’ in their Profit & Loss Account.

Benefit of equity investment: As building pension fund involves long-term investments, higher proportion of equity in NPS provides greater probability of generating higher returns to accumulate substantial retirement corpus.

How to join Corporate NPS

Any employee of an organisation, which has enrolled to NPS – Corporate Sector Model, may join it by complying with the KYC norms as detailed in the Subscriber Registration form for corporate NPS. Even if an employee is already a member of EPFO and has contributed to EPF may also join corporate NPS by submitting duly filled-in application form along with documents required for KYC.

However, undischarged insolvents and pre-existing holders of NPS accounts can’t join NPS afresh.

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