Full form of NPS

Full Form of NPS is National Pension System

The National Pension System (NPS) is a pension-cum-investment scheme launched by the Government of India on 1st January 2004 to provide growth protection to the citizens of India. The scheme is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The National Pension System Trust (NPS Trust) established by PFRDA maintains accounts of all account holders under NPS.

This scheme is mandatory for all government employees starting job on or after 1st January 2004. After the year 2009, the scheme was also opened to the people working in the private sector. Private sector artisans can join this scheme on their own free will. There is no compulsion on it. Employees can withdraw a part of the NPS after retirement and from the remaining amount can take an annuity for regular income.

Just as it is necessary for the employees working in the private sector to have an account in EPF (Employees Provident Fund) , similarly it is mandatory for all government employees to join NPS in the National Pension System scheme. 

Conditions for joining NPS:

§  The person should be an Indian citizen

§  His age should be between 18 and 60 years

§  He should be a Central government employees or

§  State Government employees or

§  Corporate sector employee or

§  Unorganized sector employees or

§  any other person

§  An NRI can also open an NPS account. His account will be closed when his citizenship changes.

How to open account in NPS scheme?

You can open your account with the help of your employer (employer).

§  You can open your NPS account by visiting your nearest bank branch

§  You can also open your NPS account online through many broker websites.

Important documents for opening an account in NPS:

§  Address proof.

§  Identity proof.

§  Birth certificate (any other document which can be used as an age proof)

§  Subscriber Registration Form

Types of NPS Accounts:

There are two types of accounts in NPS -> NPS Tier 1 and NPS Tier 2

NPS Tier 1: This account is compulsory for everyone. Whatever amount is deposited in this account cannot be withdrawn (before time) till retirement. You can withdraw its amount when you opt out of the scheme.

NPS Tier 2: Any Tier 1 account holder can open this account and can deposit money in it as per their own wish and similarly withdraw it too. This account is not mandatory for everyone. It totally depends on your wish.

Benefits of NPS scheme:

Flexiblility - The National Pension System provides a variation of investment options and the selection of a pension fund (PF) to plan for the development of investments in a proper way and monitor the development of pension funds. The subscriber can move from one investment option to another or from one fund manager to another.

Simplicity - An account opened with the National Pension System provides a Permanent Retirement Account Number (PRAN), which is a unique number and stays with the subscriber during his lifetime. The plan is structured in two levels:

Tier-I account:  This is a non-withdrawal permanent retirement account in which regular contributions are credited by the subscriber and invested according to the chosen portfolio / fund manager of the subscriber.

Tier-II Account:  This is a voluntary withdrawal account that is approved only when the Tier-I account is activated in the name of the subscriber. Withdrawals from this account are allowed according to the need of the subscriber.

Portability - The National Pension System provides smooth portability in jobs and places. It provides hassle free arrangements for every subscriber at the time of transfer to a new job / place of the subscriber without leaving the fund creation, as in various pension schemes in India.

Well regulated - The National Pension System is regulated by the Authority with transparent investment rules, regular monitoring and review of the performance of fund managers by the National Pension System Trust. Account maintenance costs under the National Pension System are among the lowest compared to similar pension products worldwide. However, when saving for a long-term goal such as retirement, the cost matters a lot because the charges are high, which can deduct a significant amount from the fund over a period of 35–40 years and above.

Double benefits of lower costs and compounding power - Until retirement, pension wealth accumulation increases over a period of time with a compounding effect. As the account maintenance fee is low, the benefits of accumulated pension money are large for the subscribers.

Ease of use - National Pension System account is manageable online. National Pension System account can be opened through e-NPS portal. In addition, contributions can be made online through the e-NPS portal.

Online -Once a PRAN account is opened, the online login ID and password are given to the subscribers. Subscribers can login and manage their National Pension System account online with one click.

Can I open more than one NPS account?

One can open one account in NPS and another account in Atal Pension Yojana. But a person is not allowed to open multiple accounts under NPS. NPS account cannot be opened jointly (two people together). NPS account can only be opened in person and cannot be opened or operated jointly by or on behalf of HUF.

How NPS scheme works?

On successful enrollment under NPS, the nominee is allotted a Permanent Retirement Account Number (PRAN). On creation of a PRAN, an email alert is sent to the subscriber's registered email ID and mobile number as well as an SMS alert by the NSDL-CRA (Central Record Keeping Agency).

Subscribers make periodic and regular contributions to NPS during working life to deposit funds for retirement. Upon retirement or withdrawal from the scheme, the subscribers are provided with the condition that some part of the fund will be invested in the annuity to withdraw from the scheme or provide a monthly pension after retirement.