A-Z OF NPS FOR A LAYMAN 

AA NNUITY: gives you periodic A type of income financial from instrument the amount that invested. at retirement Under the has NPS, to 40% annuitised. of the corpus accumulated

B BONDS: Loans given to governments or companies. Considered risk-free. NPS increases contribution of bonds in its investment strategy as you grow older.
C COST: NPS charges fund management fees of 0.0102% for the government employees and there’s a ceiling of 0.25% for the private sector.
D DEFINED CONTRIBUTION: In NPS, you and your employer make a definite contribution towards a corpus. Return will mostly depend on performance.
E EMPLOYEE PROVIDENT FUND: The corpus that you and I give 12% of our basic pay to. It invests only in debt instruments (mostly bonds). Gives a fixed return and lump sum on retirement.
F FUND MANAGER: Eleven companies have been tasked to get maximum return on the NPS corpus of worth ` 35,000 crore.
G GOAL: NPS aims to limit government liability on pensions and to create a retirement pool for those in the unorganised sector.
H HISTORY: Old Age Social and Income Security Project set up by the social justice ministry in 1998 has morphed to the NPS today.
I INDEXING: A way of pushing for assured returns in the NPS. A benchmark rate of return is mandated and can help equity-shy investors move in.
J JOBS: Distributors will be needed to push the NPS to all. Hence, it could act as a job creator. Though, commissions are low as of now
K KEY: Remember that the risk-return ratio is important and has been built-in. There is no guarantee of returns as such, though a minimum could be guaranteed
L LABOUR OUT: NPS is under the PFRDA’s regulation, under the supervision of the finance ministry, unlike the EPF, managed by a statutory body.
M METHOD: Most planners advise you to put 20-25% of your money into NPS as of now.

Administrative weaknesses are a challenge.
N NET ASSET VALUE: Tracks your fund mangers’ performance. Broadly, it is assets less liabilities/asset value.
O OBSERVE: For a new investor, NPS requires much more knowledge of the financial world than a fixed return investment like the EPF. Observe and then, then ig you feel like it, jump in.
P PRAN: Permanent Retirement Account Number (PRAN) is portable - the account number does not change after the change in job. This differentiates NPS from other products like EPFO.
Q QUESTION: As with any new financial innovation, questioning the basics of the scheme can help you be safe.
R REGULATION: Till September 7, there was no statuary regulator. The Pension Fund Regulatory and Development Authority was functioning through an executive order.
S STOP: No withdrawal allowed in case of NPS, unlike the EPF, where you can stop contributing in desperate times.
T TAXABLE: The 60% of the corpus taken out at 60 is taxable.
U UNCOVERED: More than 90% of the Indian workers are in unorganised sector. The NPS aims to cover these, but the progress has been excruciatingly slow.
V VOLUNTARY: NPS is a voluntary scheme, though the FM recently said that EPFO subscribers must be moved to the NPS.
W WOES: Coverage, distribution and the low lumpsum available when you retire. Are inbuilt in and solutions will be hard to come
X XTRA RETURN: The premise on which NPS is being sold to people. However, effective marketing is missing as yet.
Y YIELD: Has to vary as it invests in equity. Still, with the higher risk taken, will be a disappointment if does not bear inflation by a distance
Z ZEST: Government has waited nearly 10 years to give the sector regulator statutory powers. So, what’s next?
NAME- RAJ GAURAV
   PGDM 1 SEM