What is NPS?
National Pension Scheme (NPS), as the name suggests, is a Government of India initiative to provide pension opportunity to every Indian citizen. NPS was launched in January 2004 for government employees and later opened for all in 2009. The scheme allows individuals to contribute some amount to a pension account during the working life and enjoy the benefits once they retire. Subscribers can withdraw a lump sum and use the remaining corpus to buy an annuity to secure a regular monthly income after retirement.
Make a note that the government will not contribute anything to your NPS account.
The NPS scheme has two options. Tier 1 and Tier 2. Tier 1 is a mandatory and pure retirement account with 15 years lock-in period, whereas investing in Tier 2 is voluntary and is like an investment plan where you can withdraw the money whenever you want. Tier 2 option doesn’t offer tax benefits whereas Tier 1 offers an additional deduction of Rs. 50,000 per year.
Who can join NPS?
NPS is open for any Indian citizen aged between 18 and 60 years. The only condition is that the person must comply with know your customer (KYC) norms.
What is the minimum contribution towards NPS?
A subscriber is required to contribute a minimum of Rs 6,000 every year towards their Tier-I account in a financial year.
If a subscriber does not contribute the minimum amount, their NPS account will be frozen. You can unfreeze the account by visiting the nearest POP and pay the minimum required amount and a penalty of Rs 100.
How to open an NPS account
NPS is regulated by the PFRDA (Pension Fund Regulatory and Development Authority) and offers both online and offline means to open an NPS account.
Opening NPS Account Offline
To open an NPS account offline, one needs to visit a POP (Point of Presence), collect a subscriber form, and submit it along with the required KYC documents. POPs, which are mostly banks, are authorized by the Government of India to open NPS accounts for the subscribers.
You can find your nearest Point of Presence HERE
Once you make the initial investment (not less than Rs. 500 or Rs. 250 monthly or Rs. 1,000 annually), the POP will send you a PRAN or Permanent Retirement Account Number. You need the PRAN number and password in your sealed welcome kit to operate your account. There is a one-time registration fee of Rs.125 for this process.
Opening NPS Account Online
One can easily open an NPS account from a computer within less than half an hour. You need to visit the website enps.nsdl.com to open the NPS account. You’ll need to link your Aadhar, PAN, and mobile number to the account and validate the same with the OTP sent to your mobile. After this, you’ll receive the PRAN, which can be used to login to your NPS account.