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Q 3: What are the features of National Pension Scheme (NPS)?

Ans.: 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 TierII 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 employees
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
contributions 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 lumpsum.

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