National Pension System (NPS) is a defined, voluntary contribution-based retirement savings scheme backed by the Government of India. It is specially designed to help subscribers make systematic savings during their working life and secure their future.
Launched in January 2004, it was initially meant for Central Government employees. Later, in 2008, it was extended to State Government employees, and in 2009, to all citizens.
The National Pension System is regulated by PFRDA (Pension Fund Regulatory and Development Authority), and all Indian citizens, including NRIs (Non-resident Indians) and OCI (Overseas Citizens of India), aged between 18 and 85 years can join NPS.
The primary objectives of NPS include:
● Encourage the habit of regular savings and investment among citizens
● Provide steady income to the subscribers and secure their post-retirement life
● Give valuable market-linked returns to all the NPS subscribers
Features and Benefits of NPS
Voluntary
You can open a National Pension System account and contribute to your account any time during a financial year at your convenience. You can decide the amount you want to contribute annually. However, each contribution must be at least Rs. 500 for Tier I National
Pension System account.
Flexibility
You have the flexibility to select and change the POP (Point of Presence), fund manager, and investment pattern. This ensures optimized returns through investments in different asset classes such as equity, government securities, corporate bonds, debt funds, and other assets.
Portability
You can operate your National Pension System account online from anywhere or through a vast network of POPs, even if you move to a different city and switch employment.
Government Regulated
One of the most significant features of NPS is that PFRDA regulates it with transparent norms. Also, since the fund managers regularly monitor your investments and do performance reviews, you can be assured that you get valuable returns.
Tax Benefit beyond 80C
NPS – National pension System gives you tax benefit over and above section 80C. To know more read Tax Benefits under NPS
Types of NPS Account
National Pension System is an excellent investment choice that allows you to build a sizeable corpus to cover their post-retirement and emergency expenses. If you want to join NPS, you can open two types of accounts – Tier I and Tier II accounts. Let us know more about it.
Tier I NPS Account
All National Pension System subscribers must compulsorily open a Tier I National Pension System Account. You can deposit the amount in multiple instalments or lump sum. If you want to make an additional contribution to your account, you can contribute at any time during the year. However, your contributions cannot be less than Rs. 500. Also, with a Tier I National Pension System account, there is no restriction on the number of contributions you can make in a year. Withdrawals from Tier I Account are restricted and subject to specific terms and conditions. Different withdrawal rules apply to withdrawal during retirement, premature exit from NPS and partial withdrawal.
Tier II NPS Account
A Tier II account is voluntary, and you can open it when opening the Tier I account or subsequently. You can open a Tier II account with an initial minimum contribution of Rs. 1000, and you need not compulsorily deposit any amount each year to keep it active. If you have opened a Tier II NPS account, you can enjoy better flexibility than a Tier I account in terms of withdrawal; you can withdraw from your Tier II account at any time as per your convenience.
Steps to Open an NPS Account
You can open an National Pension System account either online or offline. Let us look at the steps involved.
Offline Method
To open your National Pension System account offline, you must visit the nearest POP (Point of Presence) and submit the subscriber registration form with all the necessary KYC (Know Your Customer) documents and an initial contribution amount.
After receiving the application, the POP will send it for further processing to the CRA (Central Recording Keeping Agency). If your application is approved, the CRA will send you the PRAN (Permanent Retirement Account Number) and the password to access your account, and a welcome kit containing the PRAN card.
Online Method
Opening an NPS online is easy and quick. You can click on the BUY NPS button on the HDFC Pension Website and submit the registration form and KYC documents. You will then be redirected to a payment gateway to make your initial contribution towards opening the National Pension System account.
At HDFC Pension, we have a seamless NPS registration platform to process all your financial and non-financial transactions.
While you open an NPS account, you can use the unique life99 platform to calculate the potential returns you can get on your contributions and track all your transactions.
Investing in the National Pension System is an excellent way to secure your post-retirement life
and remain financially independent all your life.
