The National Pension System (NPS) is a government-backed pension/annuity scheme that enables any Indian resident between the age group of 18 and 65 to open Tier I or Tier I and Tier II pension accounts of all sorts. A non-resident Indian or an individual with an Overseas Citizenship of India (OCI) can also open an NPS account. NRI and OCI individuals can only have ‘Tier I’ NPS accounts, though. NPS accounts are operated by the NPS Trust, that invests according to an investor’s preference in various asset groups, such as government bonds, equity market instruments and corporate debt.
- The Central Recordkeeping Agency (CRA) for the National Pension System (NPS) is NSDL (National Securities Depository Limited). A unique number identifies each employee and has a specific Permanent Retirement Account Number (PRAN).
- An individual aged 18-65 can open an NPS account in different mechanisms: online and offline. By visiting a Point of Presence (PoP), the subscriber can either request for an NPS account or do so online via the e-NPS website-enps.nsdl.com/eNPS.
- With NPS, an exit is identified as the closure of the subscriber’s individual retirement fund. According to NSDL, NPS also permits partial withdrawal from the mandatory Tier-I account under certain circumstances.
- In order to withdraw before hitting the age of 60, at least 80% of the subscriber’s accumulated pension funds should be used to purchase an annuity, to provide the subscriber with a retirement income and to pay the outstanding as a lump sum to the subscriber.
- If the overall accrued corpus in the NPS account is less than Rs 2 lakh, after reaching 60 years of age, the subscriber can qualify for a 100 percent lump-sum withdrawal. In other situations, with the procurement of an annuity plan, at least 40 per cent of the accrued corpus needs to be used, presenting the subscriber with a monthly pension. In this scenario, the outstanding is allocated to the subscriber as a lump sum.