NPS refers to the National Pension Scheme launched by Government of India. The scheme came into existence on 1st January, 2004. It is voluntary contributory pension scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The scheme was first launched for government employees. Later on, the scheme extended its coverage to all Indian citizens. Besides, NRI (non –residents Indians) can also invest in the NPS, provided they have bank accounts in India. The main intention behind the launch of this scheme was to encourage the habit of savings among all individuals across the country. The National Pension scheme allows subscribers to invest regularly in pension accounts and get returns at retirement. The main objectives of NPS are to provide :
- Old age income and security to all citizens.
- Safe market based returns over long term investments.
Who are eligible for NPS?
All India citizens including both state and central government employees are eligible for enrolling into the National Pension Scheme. The minimum entry age required for investing in this scheme is 18 years and the maximum age is 60.
How to enrol for NPS
In order to enrol for NPS, you need to submit the Composite Registration Form duly filled by you and submit it to your nearest Point of Presence (POP) or any authorized branches of POP. The list of POP service providers is available on the official websites of PFRDA, NSDL and POP. Both new as well as pre-existing users need to enrol themselves afresh for NPS.
How many accounts can be opened under NPS?
Two accounts can be opened under the National Pension Scheme. They include: Tier –I and Tier –II accounts. The Tier –I account is the primary one while the Tier-II account is the secondary account. The Tie- I account does not allow premature withdrawal whereas the Tier-II account allows withdrawal of funds at any time.
Documents to be submitted for NPS registrations
A subscriber needs to submit the following documents in support of his/her application:
- Proof of address (Passport, Ration Card with photograph, Aadhar Card and Photo identity Card, Bank Passbook, PAN Card etc.)
- Proof of Identity (PAN Card, Aadhar Card, Electricity Bill, Water Bill, Photo identity Card, Passport, Ration Card with photograph, Job Card issued by NREGA, Electricity Bill, Water Bill and Bank Passbook etc.)
How NPS is different form DBPS
The National Pension Scheme is different from the old pension scheme known as Defined Benefit Pension System (DBPS). DBPS was based on the last pay drawn by employees whereas NPS is based on both employer and employee’s contribution.
How much do you contribute for NPS?
- For a Tier-I account, a subscriber needs to make an annual contribution of Rs. 6000. The subscriber also needs to pay Rs. 500 as one time contribution for the same.
- For Tier-II accounts, a subscriber needs to pay Rs. 2,000 annually and Rs. 250 as one time contribution.
However, there is no upper limit on the maximum amount of contribution made towards this scheme.
Investment choices offered by NPS
There are two approaches under NPS by using which you can invest your money which include - Auto Choice (for Lifecycle funds) and Active Choice (for individual funds). Under the Active Choice option, you will have multiple options to invest your pension funds in the following categories:
- Asset Class E - investments in equity market instruments such as index funds.
- Asset Class C - investments in fixed income instruments.
- Asset Class G - Investments in government securities such as State Government bonds and Central Government bonds.
The NPS scheme offers multiple investment choices. In case, you don't want to go by the choices offered by it, your savings will be invested in the “Auto Choice" category.
When to exist NPS
A subscriber can exist the National Pension Scheme when:
- He/she attains the age of 60 years.
- Because of death of the subscriber.
- Or at any time before reaching the age of 60 years
Where to submit NPS withdrawal request
There is special claim processing cell called NPSCP where a subscriber can request for different types of withdrawal claims. The CRA (Central Recordkeeping Agency) will keep a track of the withdrawal formalities carried o by NPSCPC as per the instructions given by PFRDA.
How many persons can I nominate for my NPS account?
You as a subscriber can nominate total three persons for your NPS account.
When to withdraw NPS amount
You can withdraw your NPS amount at any time before your reach the age of 60. At the time of withdrawal, you would be required to invest at least 80% of total pension wealth to purchase any life annuity plan from any of the life insurance companies listed under IRDA. The remaining 20%, you can withdraw as lump-sum.You can use NPS Calculator to know how much pension amount will you get.
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