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National Pension System (NPS) is an investment cum pension scheme initiated by Government of India to provide old age security and pension of all citizen of India. The NPS was rolled out for all citizens of India on May 01, 2009. The Scheme is regulated by Pension Fund Regulatory and Development Authority (PFRDA).
Who Can Join
PRA gives access to two types of NPS accounts to Subscribers :
Tier II account can be opened along with Tier I account or at a later point of time.
| Particulars | Tier I | Tier II |
|---|---|---|
| Minimum Contribution required at the time of Account opening | Rs. 500 | Rs. 1000 |
| Minimum Subsequent Contribution Amount required | Rs. 500 | Rs. 250 |
| Minimum Contribution required per year | Rs. 1000 | NIL |
| Minimum number of contribution required in a year | 1 | NIL |
Minimum balance in Tier- II at the end of Financial year is Rs 2000/-
NPS offers Subscribers two approaches to invest their money:
| Investment Option | Description |
|---|---|
| Active Choice |
Please Note:
|
| Auto Choice |
|
Under the Active Choice NPS wealth is be invested in the following three options:
| Asset Class | Description of Fund |
|---|---|
| E | Investments in predominantly equity market instruments |
| C | Investment in fixed income instruments other than government securities |
| G | Investments in Government Securities |
| A | Alternate Investment Funds |
Subscribers can invest their entire pension wealth in C or G asset classes and up to a maximum of 75% in equity (Asset Class E) and Max. up to 5% in AIF (Asset Class A).
Allocation Matrix for Asset Class E for Active Choice
| Age (years) | Max. Equity Allocation |
| Upto 50 | 75% |
| 51 | 72.50% |
| 52 | 70% |
| 53 | 67.50% |
| 54 | 65% |
| 55 | 62.50% |
| 56 | 60% |
| 57 | 57.50% |
| 58 | 55% |
| 59 | 52.50% |
| 60 & above | 50% |
Subscribers can also distribute their pension wealth across E, C, G and A asset classes, subject to such conditions as may be prescribed by PFRDA.
Under the Active Choice, subscribers shall be required to indicate his choice of Pension Fund Manager (PFM) from among the eight Pension Fund Managers (PFMs) appointed by PFRDA. In case he does not indicate any choice of PFMs, please note that it is deemed that he has consented to opting for the default option for the PFM as provided by PFRDA.
Under the Auto Choice, NPS offers an easy option for those Subscribers who do not have the required knowledge to manage their NPS investments. In case where Subscriber is unable/unwilling to exercise any choice as regards asset allocation, his funds will be invested in accordance with the Auto Choice option.
Life Cycle Fund: Pre-defined Investment Pattern
The Auto choice comes with 3 options of Investment, depending on the maximum Equity exposure
a. Aggressive LC75- Equity upto 75%
b. Moderate- LC50- Equity upto 50%
c. Conservative LC25- Equity upto 25%
| Percentage Allocation to different Asset Classes | Moderate Life Cycle Fund ( Existing) LC- 50 |
Aggressive Life Cycle Fund LC- 75 |
Conservative Life Cycle Fund LC- 25 |
||||||
| Age | Equity ( E ) |
Corp. Bonds ( C ) |
Govt. Bonds ( G ) |
Equity ( E ) |
Corp. Bonds ( C ) |
Govt. Bonds ( G ) |
Equity ( E ) |
Corp. Bonds ( C ) |
Govt. Bonds ( G ) |
| Upto 35 years | 50% | 25% | 25% | 75% | 10% | 15% | 25% | 45% | 30% |
| 36 | 48% | 26% | 26% | 71% | 11% | 18% | 24% | 43% | 33% |
| 37 | 46% | 27% | 27% | 67% | 12% | 21% | 23% | 41% | 36% |
| 38 | 44% | 28% | 28% | 63% | 13% | 24% | 22% | 39% | 39% |
| 39 | 42% | 29% | 29% | 59% | 14% | 27% | 21% | 37% | 42% |
| 40 | 40% | 30% | 30% | 55% | 15% | 30% | 20% | 35% | 45% |
| 41 | 38% | 31% | 31% | 51% | 16% | 33% | 19% | 33% | 48% |
| 42 | 36% | 32% | 32% | 47% | 17% | 36% | 18% | 31% | 51% |
| 43 | 34% | 33% | 33% | 43% | 18% | 39% | 17% | 29% | 54% |
| 44 | 32% | 34% | 34% | 39% | 19% | 42% | 16% | 27% | 57% |
| 45 | 30% | 35% | 35% | 35% | 20% | 45% | 15% | 25% | 60% |
| 46 | 28% | 36% | 36% | 32% | 20% | 48% | 14% | 23% | 63% |
| 47 | 26% | 37% | 37% | 29% | 20% | 51% | 13% | 21% | 66% |
| 48 | 24% | 38% | 38% | 26% | 20% | 54% | 12% | 19% | 69% |
| 49 | 22% | 39% | 39% | 23% | 20% | 57% | 11% | 17% | 72% |
| 50 | 20% | 40% | 40% | 20% | 20% | 60% | 10% | 15% | 75% |
| 51 | 18% | 41% | 41% | 19% | 18% | 63% | 9% | 13% | 78% |
| 52 | 16% | 42% | 42% | 18% | 16% | 66% | 8% | 11% | 81% |
| 53 | 14% | 43% | 43% | 17% | 14% | 69% | 7% | 9% | 84% |
| 54 | 12% | 44% | 44% | 16% | 12% | 72% | 6% | 7% | 87% |
| 55 | 10% | 45% | 45% | 15% | 10% | 75% | 5% | 5% | 90% |
| 55 and beyond | 10% | 45% | 45% | 15% | 10% | 75% | 5% | 5% | 90% |
As a unique feature, subscribers get an option to select a fund manager to manage their investment portfolio. Currently, 8 fund managers are registered with PFRDA to manage the investment portfolio of NPS Subscribers.
Vesting from Tier I Account
| Particulars | Before the age 60 / Superannuation date as per service rules | At the age 60 / Superannuation date as per service rules |
|---|---|---|
| Minimum Amount required to buy Annuity | 80% of Pension Wealth | 40% of Pension Wealth |
| Withdrawal of Balance Amount | Only in one Lump sum immediately, no deferment allowed | In upto10 annual instalments till 70 years of age. OR Lump sum at any point of time before attaining the age of 70 years. OR Withdrawal can be deferred up to 70 years of age* - |
| When would Annuity start | Annuity will start immediately irrespective of age of the subscriber at the time of withdrawal | Annuity will start immediately after it is purchased. Purchase of annuity can be made immediately on retirement OR Deferred by up to 3 years from retirement date* |
| Contribution beyond 60 years / superannuation age | Not available | Allowed till 70 years of age*, Normal rules of account operation will continue to apply till exit of the subscriber from NPS. There will be no option for the deferment of the annuity purchase or deferment of withdrawal under this option which can be done anytime. |
| What happens to PRAN | PRAN will be closed. | PRAN will be closed. |
| What happens if Tier II account is also there | Amount available in Tier II account will be credited to Subscriber's Bank account automatically and Tier II account will also be closed. | Amount available in Tier II account will be credited to Subscriber's Bank account automatically and Tier II account will also be closed. |
* Request needs to be given in Central Recordkeeping Agency (CRA) system latest 15 days before retirement date.
Withdrawal / Exit from NPS: Subscribers can now initiate the withdrawal of their funds from NPS online on CRA-NSDL portal.
Annuity Services: On retirement, Subscriber can select any of the PFRDA registered Life Insurance Companies to offer Annuity Plans. Below is the list of Life Insurance companies registered with PFRDA to provide annuity services
Intermediaries in NPS Architecture
