What Is POP in NPS? Understanding Point of Presence for Seamless Investments

The National Pension System is a lucrative scheme for retirement planning. However, navigating the intricate layers of investments can seem daunting to some individuals. Thanks to the concept of Point of Presence (POP) in NPS, subscribers can enjoy a streamlined and well-regulated process. 

POP is designed to act as a crucial touchpoint, ensuring that every step—from recordkeeping to fund management—is handled precisely. Let’s dive deeper into the NPS structure and see how POP plays a pivotal role in providing a seamless investment journey for individuals planning their futures.

Understanding NPS Structure

NPS offers a structured and highly regulated framework, ensuring transparency and security for its subscribers. The Pension Fund Regulatory and Development Authority (PFRDA) has established a robust system that involves several specialised intermediaries. 

Each entity plays a crucial role in managing the different facets of the system to ensure that your pension contributions are handled efficiently. Here's a breakdown of these key components:

1. The Central Recordkeeping Agency (CRA): The CRA serves as the backbone of the NPS and is responsible for maintaining subscriber data. It acts as the liaison between various intermediaries and ensures that records are kept up to date, allowing smooth transitions across different stages of the investment process. Protean eGov Technologies is the largest CRA. 
2. Points of Presence & PoP-Service Providers: PoP and PoP-SPs are the first points of contact for NPS subscribers. Regulated by the PFRDA, PoPs are typically financial institutions or entities that facilitate the NPS enrolment process. PoP-SPs, the authorised branches of PoPs, act as the collection points where NPS subscribers can contribute and manage their investments. They provide crucial customer services such as registration, fund contributions, and more.
3. NPS Trust & Trustee Bank: The NPS Trust, set up by the PFRDA, manages the funds in the NPS scheme. These funds are stored in a Trustee Bank, which ensures that money is properly allocated to Pension Funds (PFs), Annuity Service Providers (ASPs), and subscribers in accordance with the instructions from CRAs.
4. Pension Funds (PF): Pension Funds are selected entities responsible for managing subscribers' contributions across multiple investment schemes. These funds are invested with a long-term focus to ensure the steady and secure growth of the subscriber’s pension pot.
5. Annuity Service Providers (ASP): These insurance firms, which are monitored by the Insurance Regulatory and Development Authority (IRDA) and authorised by PFRDA, convert the accumulated pension wealth into a monthly pension. They ensure that subscribers receive a regular income after retirement.
6. Custodian: Stock Holding Corporation of India Limited is appointed as the custodian to safeguard the assets held within the NPS framework. It provides custodial services to ensure all assets are securely held and properly managed.

Functions of POP in NPS

The Point of Presence (PoP) plays a central role in ensuring that your experience with the National Pension System (NPS) is smooth, transparent, and efficient. As appointed by the Pension Fund Regulatory and Development Authority (PFRDA), PoPs provide various essential services, from opening NPS accounts to managing your contributions. 

Through their network of branches known as PoP Service Providers (PoP-SPs), they are your primary touchpoint for all matters relating to your NPS account. Here's a closer look at the key functions performed by PoPs:

Registration of Subscribers

Once your NPS account is active, PoPs support you by handling your regular contributions. Their responsibilities in this area include:

• Acceptance of NPS Contribution Instruction Slip (NCIS): PoPs accept and verify your NCIS, which provides the details of your contribution, ensuring that all the information, such as your PRAN, name, and payment details, is accurate.
• Uploading Contribution Details: PoPs upload the contribution information into the Central Recordkeeping Agency (CRA) system after verifying the details.
• Fund Remittance: The POP in NPS ensures that clear funds are transferred to the Trustee Bank after deducting applicable charges and taxes. This process is carried out on a T+1 working day basis (T: the date of receipt of clear funds).

This function ensures that your contributions are accurately reflected and transferred to the relevant pension funds, helping grow your retirement savings.

Regular Subscriber Contributions

Once your NPS account is active, PoPs continue to support you by handling your regular contributions. Their responsibilities in this area include:

• Acceptance of NPS Contribution Instruction Slip (NCIS): PoPs accept and verify your NCIS, which provides the details of your contribution, ensuring that all the information, such as your PRAN, name, and payment details, is accurate.
• Uploading Contribution Details: PoPs upload the contribution information into the Central Recordkeeping Agency (CRA) system after verifying the details.
• Fund Remittance: The POP in NPS ensures that clear funds are transferred to the Trustee Bank after applicable charges and taxes have been deducted. This process is carried out on a T+1 working day basis (T: the date of receipt of clear funds).

This function ensures that your contributions are accurately reflected and transferred to the relevant pension funds, helping grow your retirement savings.

Changing Subscriber Details

You may need to update your NPS account details as life circumstances change. A POP in NPS can facilitate this process by helping you make necessary modifications, such as:

• Updating Personal Details: If your contact information or name changes, PoPs ensure that these updates are accurately recorded in the system.
• Changing Investment Schemes: If you wish to switch between various NPS schemes, a POP in NPS can facilitate these changes to your portfolio.
• Printing Account Statements: PoPs can generate and print account statements for your reference.
• Re-Issuing I-PIN, T-PIN, and PRAN Cards: If you lose your I-PIN, T-PIN, or PRAN card, PoPs can help you obtain reissued copies.

By managing these changes, PoPs ensure that your NPS account remains up-to-date and in line with your evolving financial needs.

Handling Grievances

If any issues arise or if you have any concerns regarding your NPS account, a POP in NPS is the first point of contact for resolving these matters. They act as the intermediary between the subscriber and other entities, ensuring that complaints and queries are addressed promptly. PoPs are committed to maintaining high service standards and ensuring you have a hassle-free experience with NPS.

Where Does Your Money Go in NPS?

If you use an NPS return calculator, you will realise that it’s quite a lucrative investment scheme. But have you ever wondered what happens to your funds after you invest it in NPS? When you contribute to your National Pension System (NPS) account, the money you invest doesn't just sit idly. 

Your funds are entrusted to professional Pension Fund Managers (PFMs), who are registered and regulated by the Pension Fund Regulatory and Development Authority (PFRDA). These managers carefully follow PFRDA guidelines to ensure that your money is invested wisely, with a focus on diversification to safeguard your savings. Whether the market is up or down, this strategy helps protect your retirement fund. 

Currently, NPS subscribers have the choice of eight different Pension Fund Managers, giving you the flexibility to choose according to your preference:

• SBI Pension Funds Private Limited
• Birla Sunlife Pension Management Limited
• ICICI Prudential Pension Funds Management Company Limited
• HDFC Pension Management Company Limited
• LIC Pension Fund Limited
• Kotak Mahindra Pension Fund Limited
• UTI Retirement Solutions Limited

These PFMs are responsible for managing your pension fund in a way that balances risk and returns.

Investment Choices Under NPS

NPS offers flexibility in how your money is invested. Two main options are available: Active Choice and Auto Choice. Both choices provide different levels of control over your investments.

1. Active Choice: Individual Funds

In the Active Choice option, you have the freedom to decide how your money is allocated. You will choose the Asset Class (such as stocks or bonds) and specify the percentage you want to allocate to each asset class. There are four main asset classes to choose from:

• Asset Class E: Investments in stocks and related instruments.
• Asset Class C: Investments in corporate debt and related instruments.
• Asset Class G: Investments in government bonds and related instruments.
• Asset Class A: Investments in Alternative Investment Funds (AIFs), which can include various instruments such as CMBS, MBS, REITs, AIFs, Invlts, and more.

Subscribers up to the age of 50 can invest up to 75% of their total funds in stocks. For those aged 51 and above, the maximum stock investment is based on a matrix that takes your age into account. It's also important to note that contributions to Alternative Investment Funds (AIFs) cannot exceed 5%. The total across all four asset classes must add up to 100%.

2. Auto Choice: Lifecycle Funds

For those who may not be comfortable with managing their investments, Auto Choice offers an easy solution. This option allows your funds to be invested in a life-cycle fund, which automatically adjusts the proportion of money invested in three types of assets based on your age. As you grow older, the exposure to riskier investments, such as stocks, decreases.

There are three variations of Auto Choice available, depending on your risk tolerance:

• LC75 - Dynamic Life Cycle Fund: This fund starts with 75% of the total assets in stocks and gradually reduces stock exposure as you age.
• LC50 - Moderate Life Cycle Fund: This fund begins with 50% in stocks and decreases gradually after you turn 35 years old.
• LC25 - Conservative Life Cycle Fund: This fund starts with 25% of your assets in stocks and reduces exposure as you age.

These life-cycle funds provide a set-and-forget approach to investing, where the asset allocation becomes more conservative as you grow older, helping to reduce the risk of market volatility.

Conclusion

The National Pension System (NPS) provides a robust framework for securing your retirement, offering flexibility in investment choices and expert fund management. With POPs to guide you, NPS ensures that your savings are diversified and managed efficiently. With various Pension Fund Managers to choose from, NPS is designed to provide long-term growth for your pension fund, making it a smart choice for future financial security.

FAQs:

1. Is SBI a PoP for NPS?

Yes, SBI is a Point of Presence (PoP) for NPS, offering various services to NPS subscribers. It operates through its branches, which are PoP-Service Providers (PoP-SPs), handling registration, contributions, and customer support.

2. What is the difference between CRA and PoP for NPS?

The CRA is responsible for maintaining subscriber records, managing transactions, and overseeing the fund flow within NPS. In contrast, the PoP is the initial contact point for subscribers, handling account registrations, contribution processing, and customer services.

3. What is the PoP charge for NPS?

PoP charges are applied for various services within the NPS process. Account opening is charged ₹400, while contribution processing incurs a fee of 0.50% (with a minimum of ₹30 and a maximum of ₹25,000). Non-financial transaction processing is ₹30. Additionally, there are persistency charges, ranging from ₹50 to ₹100 per annum, depending on the annual contribution amount. These charges are either deducted from the subscriber’s contribution or taken upfront.

4. Can I change my Pension Fund Manager in NPS?

Yes, you can switch your PFM once a year. However, this change is subject to the rules and conditions set by the Pension Fund Regulatory and Development Authority (PFRDA). You may need to fill out specific forms to request the change, and it's essential to consider the new PFM's investment strategies before making the switch.

5. What is the role of the Point of Presence (PoP)?

The POP in NPS serves as the first point of contact for subscribers. It facilitates the registration process, handles contributions, helps with account updates, and assists in resolving grievances. PoPs ensure that your details are correctly processed and that your NPS account is properly managed. They act as intermediaries between subscribers and other stakeholders like Pension Fund Managers (PFMs) and the Trustee Bank.

Written by Bruhadeeswaran R.

Bruhadeeswaran R. is a B2B content expert with 14+ years of experience, specializing in National Pension System (NPS), PAN, DPI, eSignPro, and Central KYC. As Editor and Lead Content Writer at Protean eGov Technologies, he simplifies complex e-governance topics through engaging blogs, reports, and digital content.