National Pension System

• Government of India introduced NPS for Central Government Employees

joining services w.e.f 1st Jan 2004 except Defense. On 1st May 2009, on
voluntary basis NPS was made available for All citizens of India. Any
Indian citizen of age between 18 and 65 years
• PFRDA (Pension Fund Regulatory and Development Authority) was
created as regulator for the Pension sector.
• NPS is based on Personal retirement accounts (PRAs) created for
individual members.
• NPS accretes savings into subscribers PRA while he is working and use the
accumulations at retirement to procure a pension for the rest of his life.
 Contribution
Government Sector
Tier-I
• Employee contribution 10% ( Basic+DA) will be deducted
per month from salary and kept under PFRDA
• Employer will Contribute 14% ( Basic+DA) to Employee
Account per month based on deduction from the
employee.
Tier II:
• Minimum amount per contribution - Rs. 250
• No minimum balance required
 Contribution
Private Sector (Non-Government Sector):
• A Subscriber is required to make initial contribution (minimum of Rs. 500 for Tier I
and a minimum of Rs. 1000 for Tier II) at the time of registration.

Subsequently, a Subscriber can make contribution subject to the following conditions:

Tier I:
• Minimum amount per contribution - Rs. 500
• Minimum contribution per Financial Year - Rs. 1,000
• Minimum number of contributions in a Financial Year – one
• Over and above the mandated limit of a minimum of one contribution in Tier I, a
Subscriber may decide on the frequency of the contributions across the year as per
his / her convenience.
Tier II:
• Minimum amount per contribution - Rs. 250
• No minimum balance required
 Where it is invested
Active choice
• Equity or E
• Corporate Debt or C
• Government Securities or G
• Alternative Investment Funds or AIF
Auto choice
• Aggressive (LC-75) – Maximum Equity exposure is 75% up to the age of
35
• Moderate (LC-50) - Maximum Equity exposure is 50% up to the age of 35
• Conservative (LC - 25) – Maximum Equity exposure is 25% up to the age
of 35
Done by PFRDA
 EXIT From NPS
• Upon Superannuation - When a subscriber reaches
the age of Superannuation/attaining 60 years of age,
he or she will have to use at least 40% of
accumulated pension corpus to purchase an annuity
that would provide a regular monthly pension.
• The remaining funds can be withdrawn as lump sum.
If the total accumulated pension corpus is less than
or equal to Rs. 2 lakh, Subscriber can opt for 100%
lumpsum withdrawal.
 EXIT From NPS
• Upon Death of Subscriber - 80% of the accumulated
pension corpus of the Subscriber has to be utilized for
purchase of an Annuity that would provide a regular
monthly pension for Spouse .
• The remaining 20% funds can be withdrawn as lump
sum.
• The entire accumulated pension corpus (100%) would be
paid to the nominee/legal heir of the subscriber. If the
total corpus is less than or equal to Rs. 2 lakh,
• The entire accumulated pension corpus (100%) would be
paid to the nominee/legal heir of the subscriber.
 EXIT From NPS
• Pre-mature Exit - In case of pre-mature exit (exit before
attaining the age of superannuation/attaining 60 years of
age) from NPS, at least 80% of the accumulated pension
corpus of the Subscriber has to be utilized for purchase of
an Annuity that would provide a regular monthly pension.
• The remaining 20% funds can be withdrawn as lump sum.
• However, you can exit from NPS only after completion of
10 years.
If the total corpus is less than or equal to Rs. 1 lakh,
Subscriber can opt for 100% lumpsum withdrawal.
 Partial with Drawal
Following are the conditions of Conditional Withdrawal:
• Subscriber should be in NPS at least for 3 years
• Withdrawal amount will not exceed 25% of the contributions made
by the Subscriber
• Withdrawal can happen maximum of three times during the entire
tenure of subscription.
• Withdrawal is allowed only against the specified reasons, for
example;
– Higher education of children
– Marriage of children
– For the purchase/construction of residential house (in specified conditions)
– For treatment of Critical illnesses