NPS Accounts

Under NPS, Subscriber gets the option to open two accounts known as Tier I account and Tier II account. A Tier I account is mandatory to open in order to join NPS. Tier II account is optional and can be opened at any point of time – at the time of opening Tier I account or later.

Difference between Tier I and Tier II accounts are as mentioned below

Tier I NPS Account Tier II NPS Account
It is also known as Pension account It is known as investment account
Withdrawal from this account is permitted after 10 years of account opening or attaining the age 60 years whichever comes early Withdrawal from this account can be done at any point of time as per Subscriber’s need
Minimum annual contribution required for this account is Rs. 1000 NA

Investment of Funds under NPS

Subscriber gets a choice of 4 funds under NPS – Equity, Corporate Bonds and Government Securities. These are also known as E, C and G respectively.

Subscriber gets the freedom to decide her own asset mix restricting the exposure to Equity to 75% of Contribution amount. It is called Active Choice Investment option.

Age (In Years)Cap on Equity
Up to 5075%
5172.5%
5270%
5367.5%
5465%
5562.5%
5660%
5757.5%
5855%
5952.5%
60 and Above50%

  • 2.5% tapering off on Equity Asset Class will happen yearly once the subscriber attains the age of 50 years.

Subscriber also gets an option of Life Cycle Fund is also known as Auto Choice. Under this mode, investment across three funds is done as per the age of the employee as shown in below chart

LC 75 – Aggressive Life Cycle Fund

AgeAsset Class EAsset Class CAsset Class G
Up to 35 years751015
36 years711118
37 years671221
38 years631324
39 years591427
40 years551530
41 years511633
42 years471736
43 years431839
44 years391942
45 years352045
46 years322048
47 years292051
48 years262054
49 years232057
50 years202060
51 years191863
52 years181666
53 years171469
54 years161272
55 years & above151075

LC 50 – Moderate Life Cycle Fund

AgeAsset Class EAsset Class CAsset Class G
Up to 35 years503020
36 years482923
37 years462826
38 years442729
39 years422632
40 years402535
41 years382438
42 years362341
43 years342244
44 years322147
45 years302050
46 years281953
47 years261856
48 years241759
49 years221662
50 years201565
51 years181468
52 years161371
53 years141274
54 years121177
55 years & above101080

LC 25 – Conservative Life Cycle Fund

AgeAsset Class EAsset Class CAsset Class G
Up to 35 years254530
36 years244333
37 years234136
38 years223939
39 years213742
40 years203545
41 years193348
42 years183151
43 years172954
44 years162757
45 years152560
46 years142363
47 years132166
48 years121969
49 years111772
50 years101575
51 years91378
52 years81181
53 years7984
54 years6787
55 years & above5590

The re-alignment of portfolio under Auto Choice is system driven and is exercised on the date of birth of the Subscriber.

Following flexibilities are given to Subscribers:

  • Subscriber can have different Investment Choice (Auto / Active) for Tier I and Tier II account
  • Subscriber can change the Asset Mix and Investment Choice once in a Financial year for both Tier I and Tier II account

Exit from the Scheme

Subscriber can exit from the Scheme after 10 years of account opening or on attainment of the age 60 years whichever is early. The payout will be defined as per the exit age of the Subscriber.

Exit before the age 60 years Exit at the age 60 years
  • Up to 20% of Corpus can be withdrawn in lump sum
  • Balance amount needs to be invested in Annuity
  • Up to 60% of Corpus can be withdrawn in lump sum
  • Balance amount needs to be invested in Annuity
If the Corpus is less than or equal to Rs.1 lakh, there is no need to invest into Annuity. Entire amount can be withdrawn in lump sum If the Corpus is less than or equal to Rs.2 lakhs, there is no need to invest into Annuity. Entire amount can be withdrawn in lump sum

Subscriber exiting from NPS at the age of 60 gets following flexibilities

  • Subscriber can defer the decision to invest in Annuity for 3 years.
  • Subscriber can defer the decision of lump sum withdrawal for 10 years.
  • Lump sum amount due for withdrawal at the age 60 can be withdrawn in 10 installments as per the choice of the Subscriber.
  • If Subscriber does not want to exit at the age of 60 years, she can keep on contributing towards NPS till the age 70 years.

Death Benefit

In case of death of the Subscriber the entire Corpus is given to the nominee. In case Subscriber has not opted for any nominee, the legal heir can claim the amount.


Partial Withdrawal from the Scheme

In the entire life span, 3 partial withdrawals are allowed from Tier I account before attainment of at 60 years as shown below

  • First partial withdrawal allowed after 3 years of NPS account opening
  • 2nd & 3rd partial withdrawal can be opted at anytime after the 1st partial withdrawal is done

25% of the Contribution amount will be allowed for specific purposes like Child marriage, Higher education, Treatment of Critical illnesses, buying home etc.


Investment in Annuity

As discussed above, on exit from NPS or retirement some portion of Corpus has to be invested into Annuity scheme to provide monthly pension then after. Entities registered with PFRDA to provide annuity service are

  • HDFC Standard Life Insurance Company Limited
  • ICICI Prudential Life Insurance Company Limited
  • Star Union Dai-ichi Life Insurance Company Limited
  • Life Insurance Corporation of India
  • SBI Life Insurance Company Limited

Annuity schemes available for NPS subscribers are as mentioned below

Sr. No Name of Annuity Scheme Description
1 Annuity for life Annuity / monthly pension are paid during the life time of Annuitant. On death, the payment of annuity ceases
2 Annuity is guaranteed for 5, 10, 15 or 20 years and for life thereafter Annuity / monthly pension are paid during the life time of Annuitant
3 Annuity for life increasing at simple rate of 3% per annum Annuity / monthly pension are paid during the life time of Annuitant. On death, the payment of annuity ceases
4 Annuity for life with return of purchase price on death Annuity / monthly pension are paid during the life time of Annuitant. On death, purchase price is returned to the Nominee
5 Annuity for life with the provision for 50% of the annuity to the spouse of the annuitant for life on death of the annuitant Annuity / monthly pension are paid during the life time of Annuitant. On death of the Annuitant, 50% of original monthly pension is paid during the life span of Spouse of the Annuitant. On death of the Spouse, the payment of annuity ceases
6 Annuity for life with the provision for 100% of the annuity to the spouse of the annuitant for life on death of the annuitant Annuity / monthly pension are paid during the life time of Annuitant. On death of the Annuitant, monthly pension is paid during the life span of Spouse of the Annuitant. On death of the Spouse, the payment of annuity ceases
7 Annuity for life with the provision for 100% of the annuity to the spouse of the annuitant for life on death of the annuitant, with return of purchase price on death of the last survivor Annuity / monthly pension are paid during the life time of Annuitant. On death of the Annuitant, monthly pension is paid during the life span of Spouse of the Annuitant. On death of the Spouse, purchase price is returned to the Nominee