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NPS FAQ's
The National Pension System (NPS) is described as a defined contribution pension scheme in which an individual voluntarily contributes to a personal pension account during working years to build a corpus that will generate regular income after retirement or the end of working life. It is also stated that NPS is mandatory for new Central Government employees (except armed forces) from 1 January 2004, replacing the earlier defined‑benefit pension, and has since been adopted by almost all State Governments for their employees.
- Regulated - NPS is regulated by PFRDA, which is established through an Act of Parliament. (PFRDA Act 2013)
- Pension for All - can be voluntarily subscribed by any Indian Citizen (resident/non-resident/overseas citizen).
- Low Cost – NPS is one of the lowest cost pension schemes in the world.
- Flexible - Subscribers have choices of Point of Presence (PoP), Central Recordkeeping Agency (CRA), Pension Fund and Asset Allocation. The choices exercised can be changed subsequently.
- Portable – NPS accounts can be transferred across employment, location/geography.
- Tax efficient – Tax incentives are available to subscribers under the Income Tax Act 1961.
- Optimum returns – Market linked returns based on investment choice made by the subscriber.
- Transparent – Subscribers can access their NPS accounts online 24X7 and public disclosures mandated.
Every individual subscriber is issued a Permanent Retirement Account Number (PRAN) card and has a 12-digit unique number. In case of the card being lost or stolen, the same can be reprinted with additional charges.
In such an unfortunate event, the nominee will receive 100% of the NPS pension wealth in lump sum.
The entities involved in NPS are as follows: -
- NPS Trust: The NPS trust has been constituted for taking care of the assets and funds held under NPS in the interest of the beneficiaries (subscribers). The Trust issues the investment guidelines and regularly monitors and reviews the performance of Pension Fund Managers.
- Central Recordkeeping Agency (CRA): Central Recordkeeping Agency performs various functions like recordkeeping, administration, issuance of PRAN and customer service functions for all subscribers of NPS. National Securities Depository Limited (NSDL) is the Central Record-keeper for the NPS.
- Pension Funds (PFs): The eight Pension Funds (PFs) appointed by PFRDA manage the retirement savings under the NPS.
- Trustee Bank: The Trustee Bank manages the banking functions across various entities of the NPS system viz. PFs, ASPs, Subscribers, etc. Axis Bank has been appointed as the Trustee Bank.
- Annuity Service Providers (ASPs): ASPs would be responsible for delivering a regular monthly pension to the subscriber after exit from the NPS.
- Point of Presence Service (POP-SPs): are the designated branches of registered POPs to extend the reach of NPS. POP/POP-SP will perform the functions relating to registration of subscribers, undertaking Know Your Customer (KYC) verification, receiving contributions and instructions from Corporates and transmission of the same to the designated NPS intermediaries.
- Custodian: Stock Holding Corporation of India Ltd. (SHCIL), the Custodian is responsible for custody of underlying securities.
Any Indian citizen between the ages of 18 years and 70 years can subscribe to NPS.
Yes, An NRI can open an NPS account. Contributions made by NRI are subject to regulatory requirements as prescribed by RBI and FEMA from time to time. If the subscriber’s citizenship status changes, his/her NPS account would be closed. NRIs are only allowed to open Tier 1 accounts.
As an individual subscriber through the “All Citizens Model”
As an employee through the company of which he is an employee under the “Corporate Model”.
No, multiple NPS accounts for a single individual are not allowed and there is no necessity also as the NPS is fully portable across sectors and locations.
- Tier I – A NPS account with restrictions on withdrawal
- Tier II – A voluntary savings NPS account from which a subscriber can withdraw anytime. Read more
| Particulars | Tier I | Tier II |
|---|---|---|
| Minimum Contribution at the time of account opening | Rs. 500 | Rs. 250 |
| Minimum amount per contribution | Rs. 500 | Rs. 250 |
| Minimum total contribution in the year | Rs. 1000 | - |
To read more: Click Here
Contribution to NPS are *tax deductible under 80CCD(1), Section 80CCD(1B) and Section 80CCD(2) of the Indian Income Tax Act, 1961.
To read more: Click Here
Yes. NPS can be voluntarily subscribed to along with any other pension scheme(s). However, an individual cannot have multiple NPS accounts.
Yes, a minor can be a nominee. In such cases, subscribers will be required to provide guardian's details and date of birth of the minor.
The amount of pension will depend on the contribution amount, accrual/returns on the investments and the portion of corpus utilized by the subscriber for purchasing annuity plan from any of the Annuity Service Providers empaneled with PFRDA.
Calculate your pension amount: Click Here