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How to Automate NPS Contributions - A Step by Step Guide with Screenshots

Introduction

The National Pension System is a great financial product for creating your retirement kitty. With contribution of just ₹5000 per month, you can accumulate more than a crore! I am a NPS subscriber (through NSDL eNPS) myself. If you have read my previous post regarding EPF you know I like NPS for the following reasons.
  • 60 year lock-in period
  • Additional tax exemption under section 80CCD (1B)
  • Choice of various assets classes
  • Choice of pension fund managers
  • Option to change your asset allocation or pension fund manager
  • Low cost of fund management
  • Transparency & organization structure
  • Good customer support
  • Online account opening and management
  • Multiple exit options at retirement
Pension calculation illustration
Screenshot from Pension Calculator | NPS Trust

Some Not So Great Things

NPS is far from perfect though. Following are some of the things that annoy me the most.

  • It takes a long time (at least 2 days) for your contributions to get credited to your account
  • It's mandatory to buy an annuity plan at retirement
  • NSDL's NPS web app and mobile apps are very old school
The Nation Pension System was launched in 2004 for government employees. An portion of their salaries gets deducted and credited to their NPS accounts. Later the product was also opened for all Indian citizens. However, for the private employees there was no option to automate the contributions until now. As we know, discipline is the most important thing while investing. NPS' T+2 days settlement period also meant you could not take advantage of market falls. Because you didn't know which day's NAV would you get. I have received NAVs after 2 weeks in some cases!

On 12 May 2020, PFRDA (the regulator for NPS), announced the D-Remit or Direct Remittance feature. And on 1st October 2020, the feature was made public. This was the best change to NPS since it was opened to the organized sector! With this, PFRDA has solved issue #1 mentioned above.

Steps to Automate Your Contributions

The steps are a bit involved than I would have liked. But it's better than nothing! Here's your step by step guide.
  1. You need to create Virtual Account Numbers for your PRAN. You can do so by visiting the Virtual Account Creation page. You'll get 2 different numbers for your Tier 1 and Tier 2 accounts.
    Step 1 of virtual account creation
  2. Follow the steps on the screens. Your account creation request will be accepted and you'll get confirmations via email and SMS.
    Step 2 of virtual account creation
    Pro Tip: If you get an error message saying "System exception occurred, Please contact to Admin", open the web page in a private window.
  3. After a day you'll get your Virtual Account Number through email. The email will also include other details needed to setup a standing instruction.
    Email confirmation after virtual account creation
  4. Now you have to visit your bank's website and add a NEFT beneficiary with the details received in the email.
    Beneficiary addition on SBI's Internet Banking website
  5. After the beneficiary gets activated, you can go on to create a standing instructions. Here I have created a standing instruction of ₹1000 that will get executed every week.
    Standing Instruction creation on SBI's Internet Banking website
    It is recommended that you the write the purpose as "NPS contribution for D-Remit".

Conclusion

With these steps, you can utilize the D Remit facility and get the NAV of the same day! And best of all, it's free cost cost.

There is just one catch... As of now, you'll get the NAV of the same day only if the your virtual account is credited before 08:30 A.M. If the amount is transferred after 08:30 A.M., you'll get the NAV of the next day. That's better than 2 weeks I guess! Congratulations now you have your NPS contributions on autopilot.
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Location: India

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