Switch Superannuation Fund to NPS? A Full Information

Planning for retirement is an important a part of monetary wellness. Historically, many staff relied on superannuation funds for his or her retirement corpus. Nonetheless, with the emergence of the Nationwide Pension System (NPS) providing better flexibility and tax advantages, many people are contemplating transferring their superannuation fund to NPS. Let’s perceive every part it’s good to find out about this switch course of.

What’s Superannuation Fund?

A Superannuation Fund is an employer-sponsored pension plan the place the employer contributes a portion of the worker’s wage towards the worker’s future pension. Typically, the contribution is round 15% of the worker’s fundamental wage plus dearness allowance (DA). The worker can entry these funds upon retirement. You may test right here on calculate superannuation profit? These funds are normally managed by belief funds or insurance coverage corporations like LIC.

What’s NPS?

The Nationwide Pension System (NPS) is a government-backed, voluntary retirement financial savings scheme geared toward encouraging systematic financial savings. NPS permits people to contribute often in a low-cost, market-linked funding mannequin. Upon retirement, 60% of the corpus might be withdrawn tax-free, and the remaining 40% is used to buy an annuity plan to obtain a daily pension.

Advantages of Transferring Superannuation Fund to NPS

Whilst you can Withdraw Superannuation Fund in India, there are a number of advantages of transferring it to NPS too.

Increased Tax-Free Withdrawal: In superannuation, just one/third (approx. 33%) is tax-free upon retirement. In NPS, as much as 60% might be withdrawn tax-free.
Zero GST on Annuity Buy: Whereas shopping for an annuity underneath superannuation attracts 1.8% GST, no GST is levied for annuities underneath NPS.
Higher Returns: NPS, being a market-linked product, typically delivers higher returns in comparison with conventional superannuation funds. Verify this text about 3 NPS Funds that delivered over 22% CAGR within the final 5 years.
Flexibility: NPS permits partial withdrawal after 5 years, whereas superannuation funds are inflexible and depend upon belief insurance policies.
Portability: In case of a job change, NPS accounts stay intact. Superannuation schemes might power obligatory withdrawal if the brand new employer doesn’t supply an analogous plan.

Pre-requisites for Transferring Superannuation to NPS

You have to have an lively NPS Tier I account.
It is best to have a legitimate PRAN (Everlasting Retirement Account Quantity).
Coordination between your outdated employer/belief and the brand new employer/Level of Presence (POP) is required.
Needed documentation like switch letters and fund launch directions should be prepared.

Step-by-Step Means of Transferring Superannuation Fund to NPS

Open an NPS Account: Open a Tier I NPS account by your employer, financial institution, or POP.
Request Switch: Apply to your present superannuation belief or fund supervisor requesting a switch to NPS.
Issuance of Cheque/Draft: The superannuation fund will subject a cheque/draft within the following method:
- For Govt. staff: “PAO/CDDO Title<>Worker Title<>PRAN Quantity”
- For Personal staff: “POP Assortment Account-NPS Belief<>Subscriber Title<>PRAN Quantity”
Receive Switch Letter: Together with the cheque/draft, get an official letter mentioning the switch particulars.
Submit Paperwork to POP/Employer: Submit the cheque/draft and switch letter to your employer (if NPS is employer-based) or on to your POP.
Fund Importing: Your employer/POP will add the transferred funds to your NPS Tier I account with applicable remarks.

Switch LIC Superannuation Fund to NPS

In case your superannuation fund is managed by LIC, right here’s how one can proceed:

Attain out to the LIC department managing your superannuation.
Submit an software requesting switch to NPS.
LIC will subject a cheque favoring the NPS Belief along with your PRAN particulars.
Acquire the switch letter from LIC.
Submit each the cheque and letter to your employer or POP.
Monitor the switch till the funds are credited to your NPS Tier I account.

Switch Superannuation Fund to HDFC NPS?

HDFC Pension supplies finish to finish help to subscribers in addition to corporates keen to launch NPS for his or her staff and in addition with migration of the Superannuation funds to NPS.
If you’re a retail subscriber keen to switch your Superannuation corpus to NPS or in case you are a company nodal officer or from the payroll group, write to npscorpqueries@hdfcpension.com to know extra.

Destructive Elements of Shifting to NPS

Whereas NPS affords a number of advantages, it’s essential to think about a number of limitations:

Market Threat: Returns in NPS are market-linked and will not be assured.
Necessary Annuity Buy: Even after maturity, 40% of the corpus should be used to purchase an annuity, which could supply decrease returns.
Lock-in Interval: Untimely exit requires the account to be lively for at the least 10 years.
Restricted Fund Decisions: In comparison with different funding choices, NPS affords restricted fund managers and asset allocation flexibility.
Contribution Limits: The ten% contribution restrict (for workers) could also be decrease than what some superannuation schemes supply.

Conclusion

Transferring your superannuation fund to NPS could be a sensible transfer in case you are on the lookout for higher tax advantages, larger returns, and suppleness in managing your retirement corpus. Nonetheless, since NPS comes with market dangers and obligatory annuity situations, it’s essential to evaluate your monetary objectives and threat urge for food earlier than making the choice. If you’re able to embrace a market-linked retirement plan with potential for better development, shifting to NPS may very well be a wonderful selection.

FAQs on Transferring Superannuation Fund to NPS

What’s a Superannuation Fund?
A Superannuation Fund is an employer-sponsored pension scheme the place a portion of your wage is put aside for retirement, normally managed by a belief or insurance coverage firm like LIC.
What’s the Nationwide Pension System (NPS)?
NPS is a voluntary, government-backed retirement financial savings scheme that enables systematic investments in market-linked belongings with partial tax-free withdrawal advantages at retirement.
Can I switch my superannuation fund to NPS?
Sure, eligible people with an lively NPS Tier I account can switch their superannuation fund to NPS.
What are the advantages of transferring my superannuation fund to NPS?
You get larger tax-free withdrawal, higher returns, flexibility, portability, and 0 GST on annuity buy underneath NPS.
Is there any tax profit in NPS in comparison with Superannuation?
Sure, in NPS, as much as 60% of the corpus might be withdrawn tax-free versus just one/third in superannuation.
Do I would like an lively NPS account earlier than transferring my superannuation fund?
Sure, you need to have an lively Tier I NPS account and a legitimate PRAN quantity earlier than initiating the switch.
What paperwork are wanted for the switch?
You want a cheque/draft favouring NPS Belief and an official switch letter from the superannuation fund or LIC.
Can I switch LIC-managed superannuation funds to NPS?
Sure, you’ll be able to. It is advisable apply to LIC, get the cheque and switch letter, and submit them to your POP or employer.
What are the dangers of transferring superannuation to NPS?
Being market-linked, NPS carries funding dangers, and returns will not be assured.
Is GST relevant when transferring from Superannuation to NPS?
No, there isn’t any GST levied on annuity buy underneath NPS.
How is the transferred superannuation quantity handled in NPS?
It’s credited as a non-contributory deposit and individually identifiable in your NPS account.
What if my employer doesn’t supply NPS facility?
You may nonetheless preserve and function a person NPS account independently by a registered Level of Presence (POP).
Can I partially withdraw from NPS after transferring my superannuation fund?
Sure, partial withdrawals are allowed after sustaining the account for at the least 5 years for particular functions like sickness, schooling, or residence buy.
Who ought to subject the switch cheque for personal sector staff?
For personal staff, the cheque needs to be drawn in favor of “POP Assortment Account-NPS Belief” together with the subscriber’s title and PRAN quantity.
How lengthy does it take for the superannuation switch to mirror in my NPS account?
Usually, it could take a number of weeks relying on how rapidly the employer, LIC, or POP processes the paperwork and uploads the funds.
Can I proceed to contribute to NPS after transferring my superannuation fund?
Sure, you’ll be able to proceed common contributions to your NPS Tier I account even after transferring your superannuation quantity.
What occurs if I change jobs after transferring my superannuation to NPS?
Your NPS account is transportable and stays with you regardless of job adjustments, not like conventional superannuation schemes.
Is the transferred superannuation fund eligible for tax deductions underneath 80CCD(1) or 80CCD(2)?
No, the transferred quantity itself shouldn’t be eligible for recent tax deductions underneath 80CCD sections. Solely your new contributions qualify.
Can I go for totally different fund managers after transferring my superannuation to NPS?
Sure, NPS lets you select and even change fund managers and asset allocation choices inside sure pointers.
Is it obligatory to purchase an annuity with a part of my NPS corpus after retirement?
Sure, at the least 40% of your closing NPS corpus should be utilized to buy an annuity to make sure a daily pension post-retirement.
Is NPS higher than EPS (Workers’ Pension Scheme)?
NPS usually affords higher returns as it’s market-linked and supplies larger flexibility in comparison with EPS, which affords mounted pension quantities based mostly on a method however with restricted development potential.
Can I’ve each NPS and Superannuation?
Sure, you’ll be able to have each schemes concurrently. You may contribute to your employer’s superannuation fund whereas additionally sustaining a person or employer-linked NPS account.
How can I withdraw my LIC Superannuation?
To withdraw your LIC Superannuation, it’s good to apply to the LIC department dealing with your fund, full crucial kinds, present identification paperwork, and select between choices like lump sum withdrawal or buying an annuity plan as per the scheme’s guidelines.

Have you ever not too long ago transferred your superannuation fund to NPS or planning to take action? Share your expertise or queries within the feedback under!

Suresh KP is a seasoned monetary knowledgeable with over 20 years of expertise. He’s NISM Licensed Funding Adviser and Analysis Analyst. For extra about his experience and certifications, go to About Suresh KP

Newest posts by Suresh KP (see all)