NPS is a voluntary scheme under the pension system of PFRDA (Pension Fund Regulatory and Development Authority), which is available to all citizens in the age group of 18-60 years.
New Delhi:National Pension Scheme or New Pension system NPS details : How to ensure regular income in old age so that life after the job can also be spent comfortably, this concern is faced by everyone from private jobs to businessmen. The responsibility of old people in the society lies with the society as well as the government. The government has made many efforts many times to solve this concern.
For this purpose, the new pension system or say National Pension Scheme (NPS) was started by the Government of India for all the citizens. It is operated by the Pension Fund Regulatory and Development Authority (PFRDA) as the regulator of pension funds. Secures income in the form of pension in old age, once the subscriber(s) i.e. the person availing the scheme completes 60 years of age.
Explain that NPS (New Pension Scheme) is a voluntary scheme under the pension system of PFRDA (Pension Fund Regulatory and Development Authority), which is available to all citizens in the age group of 18-60 years. The scheme was implemented by the UPA Government from 01.05.2009. The objective of the NPS (National Pension System) scheme is to provide pension in old age with market driven returns in the long run.
What is NPS scheme
NPS scheme is implemented through designated branches of the bank i.e. Point of Presence-Service Provider (POP-SP Point of Presence- Service Provider). These places accept applications and get the subscriber registered with the Central Record Keeping Agency (CRA) for generation of Permanent Retirement Account Number (PRAN). Also, PRAN (PRAN Permanent Retirement Account Number) is mentioned for all future transactions.
Two types of NPS accounts
There are two types of accounts in NPS – Tier I and Tier II. Tier-I account is an account in which the subscriber contributes his/her savings for retirement in a non-withdrawable account till the age of 60 years and can receive pension for the rest of his life.
In case of Tier-I
- Minimum contribution at the time of account opening – Rs.500/-
- Minimum amount per contribution – Rs. 500/-
- Minimum account balance at the end of the financial year – Rs. 6000/-
- Minimum number of contributions in a year – 1
Here the subscriber can exit the scheme after attaining the age of 60 years. He will compulsorily have to do an annuity plan of 40% of the accumulated pension wealth. There is also an option to annuitize 100% of the corpus.
Whereas, Tier-II account is a voluntary savings account. In this, the customer is free to withdraw his savings whenever he wants. Tier-II account is available to existing Permanent Retirement Account (PRA Permanent Retirement Account) holders. Here the facility of savings is available through investment in addition to Tier I and above. Do note that to open a Tier II account, one must have an active Tier I account in the past.
No additional CRA (Central Recordkeeping Agency) charges (Charge Per Transaction) will be levied for account opening and annual maintenance in respect of Tier II. Whereas, CRA will charge separately for each transaction in Tier II, which will be in line with the transaction charge structure prescribed in Tier I. Explain that there is no limit on the number of withdrawals in Tier II. Apart from this, there is a facility of separate nomination and scheme preference in Tier I and Tier II. There is also a facility for one-way transfer of savings from Tier II to Tier I. It is noteworthy that bank details have been made mandatory for opening Tier II account. No separate KYC will be required for opening Tier II account; Only pre-existing Tier I account is required.
In case of Tier II
- Minimum contribution at the time of account opening – Rs.1000/-
- Per contribution Minimum amount – Rs. 250/-
- Minimum account balance at the end of the financial year – Rs. 2000/-
- Minimum number of contributions in a year – 1
In case of composite application for both Tier I and Tier II, the minimum contribution at the time of account opening is Rs. 1500/- should be Rs.
How to get the benefit of the scheme
After the process is completed, the person availing the scheme is informed about the Permanent Retirement Account Number (PRAN) by the CRA. Thereafter, after the PRAN is provided by the CRA, the subscriber can start submitting his/her subscription through his/her chosen POP-SP. The CRA maintains a record of all subscriptions to the scheme.
A subscriber is allowed to invest in any one of the three options available according to him.
- First – High Risk High Return (Asset Class E): Invests predominantly in equity market instruments.
- Second – Moderate Risk Moderate Return (Asset Class C): Investment in debt securities other than Government securities.
- Third – Low Risk Low Return (Asset Class G): Investing in Government Securities.
