National Pension Scheme (NPS) is a government-funded pension scheme. It was launched in 2004 by the Government of India. Initially, only govt employees were eligible for this scheme. Later in 2009, the scheme was opened for all working section.
In our day to life, Different images pop up in our minds in the name of retirement. Some people plan about traveling, seeing old friends, and spending their lazy days almost doing nothing. While a few others live in fear of being dependent on others with no savings and no means to earn.
According to the UN reports, the general longevity if people are going to increase, thereby increasing the duration of the retired life. In addition, you better start planning for your life after retirement when you have the time and opportunity to earn, save, and invest enough to secure your own safety till the last day of your life.
In this article, you will find everything about the National Pension Scheme in detail.
|Name of the Scheme||National Pension Scheme (NPS)|
|Scheme Launched by||Pension Fund Regulatory and Development Authority (PFRDA)|
|Launched Year||1st January 2004|
|Targeted Beneficiaries||The economically weaker sections of India like farmers, self-employed and individuals belonging to the labor class|
|Objective of the Scheme||To institute pension reforms and to inculcate the habit of saving for retirement amongst the citizens|
|Mode of Application||Online and offline|
|Benefits||Retirement Plan for All|
|Official Website||http://enps.nsdl.com/ http://enps.karvy.com/|
What Exactly is the NPS – National Pension Scheme?
National Pension Scheme (NPS) is a pension scheme where any eligible Indian can invest in a pension account on a yearly basis to get benefited after their retirement. Firstly, the scheme is organized by the PFRDA and provided to all resident or non-resident Indian citizen between the age group of 18 to 65. Even a 60-year-old person can join this scheme and continue contributing until he is 70 and enjoy the benefit for the rest of his life.
In the beginning, in 2004, the National Pension Scheme was introduced for the new government employees except for the armed forces. But later, in 2009, it started being provided to every citizen, including the unorganized sector workers.
National Pension Scheme (NPS) is accepted to be a beneficial scheme for employers, employees, and even the self-employed. While the last two categories can register independently, the employers can offer their employees to choose between NPS and PF.
Types of NPS Accounts
There are two different types of pension accounts to consider under the National Pension Scheme (NPS) – Tier I and Tier II. Initially, the tier I category is a mandatory account, whereas the Tier II account can be opened additionally. Besides, the main difference between these two types is in their withdrawal systems. Further down the line, the pension account from the first category offers a multitude of tax benefits, but there is no withdrawal provision until you reach the age of 60 years.
There can be exceptions of a partial withdrawal of maximum 25% only in such cases as when a person suffers from a critical illness, is in of money for his/her child’s education or marriage, or for construction of a house.
On the other hand, the Tier II account holders have no such restrictions, with the ability to withdraw their money at any point in time. None the less, there will be no tax benefits as well.
Eligibility Criteria for the National Pension Scheme (NPS)
At first, bear in mind, there is no strict eligibility criterion to open an NPS account. Any Indian citizen is eligible to become an NPS subscriber. Even the non-residential-Indians (NRIs) are eligible too. But the person must fall between the age group of 18 years to 60 years. Nevertheless, there are certain categories that fall under the different procedure of subscription.
- Central Government Employees (except armed forces)
- State Government Employees
- Corporate Sector employees
- Any Individual
- Unorganized Sector Workers – Swavalamban Yojana
People who do not fall under the age category cannot be entertained under this scheme. Apart from that, there are few more conditions having which people can’t apply for NPS –
- Existing account holders
- People who are under an “order of discharge” by court
- Persons with unstable mental conditions who cannot decide rationally about the effects of the scheme on their interest.
How to Subscribe for the National Pension System?
Most importantly, both online and offline options are available for opening an NPS account. At first, people can choose any of them according to their convenience.
- Apply Online
Firstly, any Indian citizen can open an NPS account on meeting all the eligibility criteria. You can open the account online through the official website. After that, this link will further redirect you to the Central Record-keeping Agency’ (CRA) official portal enps.nsdl.com or enps.karvy.com.
Further down the line, you will get all the details and guidelines for the registration process. Also, you can make online contributions through any of the online banking processes.
- Apply Offline
If you wish to go for the offline procedure, you can go to your nearest NPS PoP (Point-of-Presence) service provider and get a form. On submission of that form along with your KYC documents and an initial contribution, a PRAN (Permanent Retirement Account Number) card will be sent via correspondence to your address by CRA.
Further, you will be able to log in to your NPS account with the PRAN number through different channels. If you are logging in for the first time, go to https://npscra.nsdl.co.in/, set-up a password, and your primary registration will be complete.
NPS Contribution Criteria
In this section, we are going to discuss the contribution criteria. The earlier you start investing, the more you can make of this scheme. Because the pension amount depends on the accumulated balance that you contribute throughout your life.
At first, in NPS Tier I account, one can contribute a minimal amount of Rs500 at a time. However, one has to make a minimum of Rs 1000 contribution in one financial year. Further including, a minimum of 1 contribution is a must in a year.
After meeting the minimum requirement, you can decide the frequency of your contributions as per your convenience. Similarly, in the NPS Tier II account, which is provisional, one has to contribute a minimum amount of Rs 250 each time. Apart from this, you need to pay certain charges while starting the account and making other payments.
Above all, you can make a maximum of 3 partial withdrawals accumulating 25% of your total contribution during the entire tenure. But that would be possible only after three years of the account opening. This 25% would be a total withdrawal of 3 times. For instance, it can be like 5%, 10%, and only another 10%.
These withdrawals are free from tax. But for the Tier II accounts, there are no lock-ins or restrictions on withdrawals.
Also Read, Pradhan Mantri Jan Dhan Yojana
There are multiple ways of grievance redressal mechanism in the NSDL-CRA, which are easily accessible and effective. Down below is a list some of the ways in which you can apply for grievance:
- Web-Based Interface
- Call Centre/ Interactive Voice Response System (IVR)
- Physical Forms
- By approaching to the associated Nodal Office
- Through correspondence or email
Benefits of National Pension Scheme (NPS)
National Pension Scheme is an excellent initiative by the Government of India offering an architecture of planning for retirement & pension needs of the citizens.— ZFunds.in (@z_funds) June 16, 2020
Take a look at the comparison of NPS with other retirement savings schemes.
Know more :https://t.co/AtYMFnV8aq pic.twitter.com/F0bG8o232e
1) For starters, one can contribute at any point in time and change the amount as per his/her convenience.
2) The account opening process with any of the options – online or offline, is extremely easy.
3) Similarly, the NPS subscribers have options to choose their own investment options and pension fund.
4) Initially, the National Pension Scheme (NPS) accounts can be operated even if the subscriber changes city or employment at any point in time.
5) Lastly, the National Pension Scheme is regulated by a central Govt. body like PFRDA and regularly monitored and reviewed by NPS Trust.
It is imperative to understand that planning finances are a very challenging and tricky task. If you don’t plan for your retirement from years before, it can turn out to become difficult to survive. There are many ways of planning. Above all, either you can manage your earning or your expenditure in order to invest and save more for your future.
Additionally, you always have to be prepared for all sorts of emergencies in life. So, it is very much important to plan tactfully beforehand to secure your future. National Pension Scheme can be a life saviour for thousands of old age parents.