National Pension System (NPS) scheme

National Pension System (NPS) is a central government-controlled voluntary and long-term investment plan for retirement under the purview of the Pension Fund Regulatory and Development Authority (PFRDA). The pension scheme is aimed at providing social security to the people of India. NPS was launched in 2004 for government officials. However, in 2019, the government announced that all individuals from the public, private and even the unorganised sectors, except those from the armed forces, can apply for the pension scheme.

The National Pension System helps account holders to earn a stable income even after retirement, along with considerable returns on their investment. The account holders are entitled to invest in the pension account at regular intervals during the course of their employment.

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As per the guidelines, a NPS account holder is mandated to contribute a minimum of Rs 6,000 every financial year. After retirement, the beneficiary can opt to withdraw a part of the sum, about 60 per cent. The remaining 40 per cent of the contribution is utilised for the procurement of a lifetime pension via the purchase of an annuity. Notably, returns are market-linked and there are no assured/fixed guaranteed returns. The subscribers are free to exit the plan before retirement or opt for superannuation.

The National Pension System subscribers are allowed to make systematic investments via either of the following two accounts - Tier I NPS accounts and Tier II NPS accounts.

If one chooses, Tier I NPS account option, then the individual will not be able to withdraw till the age of 60 or he/she has retired. The Tier II NPS account is a voluntary savings account and the beneficiaries can withdraw the accumulated money whenever they want.

People wishing to open NPS accounts should be an Indian citizen (resident or non-resident) or a Non-Resident Indian (NRI) and should be aged between 18 to 70 years. The applicants are mandated to comply with the Know Your Customer (KYC) norms as required in the Subscriber Registration Form. Overseas citizens of India (OCI), Hindu Undivided Families (HUFs), and Persons of Indian Origin (PIOs) are not eligible to subscribe to NPS.

If an individual wishes to open an NPS account offline or manually. The individual has to first look for Point of Presence (authorised banks) and get a subscriber form following which he/she has to go through the KYC process. The PoP will issue you a Permanent Retirement Account Number (PRAN) after the account holder makes the first payment (not less than Rs 500, Rs 250 monthly, or Rs 1,000 annually).

The PRAN number and the password sent to the account holder in the welcome kit helps the individual in operating the account. A one-time registration fee of Rs 125 is incurred for this process. The NPS subscribers can deposit their contributions through the convenience of the Unified Payments Interface (UPI) QR code.

Tier – I Account

Tier – II Account

Individual Pension Account

Optional Account and requires an active Tier-I Account

Withdrawal allowed as per the rules

Unrestricted withdrawals

Minimum contribution to open is Rs 500/-

Minimum Contribution to open is Rs 250/-

Minimum Contribution per year is Rs 1000/-

No restriction on Minimum Contribution per year

AMC charges applicable

No separate AMC charges applicable

National Pension System scheme provided tax benefits to employees on Self-Contribution, tax benefits to employees on Employer's contribution, tax benefits to self-employed, tax benefits on partial withdrawal from NPS account, tax benefit on purchase of Annuity, tax benefit on lump sum withdrawal, tax benefits to corporates/ employers.

Union Finance Minister Nirmala Sitharaman launched ‘NPS Vatsalya’ - the new pension scheme for minors on September 18, 2024. The new pension scheme is aimed at securing the future of the young generation. The retirement investment plan underscores the importance of nurturing a culture of savings from an early age.