NPS Scheme – National Pension Scheme

What is National Pension Scheme (NPS)

The National Pension Scheme (NPS) is a social security scheme that may be accessed online. PFRDA  has control over NPS. The federal government created NPS in 2014. NPS is a scheme based on contributions that offer retirees with returns linked to the market.

Benefits of National Pension Scheme (NPS)

Retirement Income

NPS provides a regular income stream during retirement, helping individuals maintain financial independence and meet their post-retirement expenses.

Tax benefits of National pension scheme

The scheme offers attractive tax benefits, both at the time of contribution and during the payout phase, making it a tax-efficient retirement savings option.

Long-Term Wealth Creation

NPS investments have the potential to generate significant wealth over the long term, especially if the subscriber opts for an equity-heavy portfolio.

Financial Security

With NPS, subscribers can plan for a secure retirement, reducing their dependence on family members or social welfare programs.

Flexibility

NPS allows subscribers to choose their investment preferences and make partial withdrawals for specific financial needs.

Annuity Options

Subscribers can select from a range of annuity options to tailor their post-retirement income according to their preferences and needs.

National Pension Scheme Interest Rate

The interest or returns generated by the NPS scheme are contingent on the contributions made and the choice of asset classes. 

These returns are market-linked due to the NPS’s allocation to asset classes like equities and debt. 

Historically, NPS has delivered annual returns ranging from 9.00% to 12.00%, depending on the selected schemes. However, there is no fixed rate of return (NPS interest rate) established. In comparison to other fixed-income savings schemes, NPS has exhibited relatively strong performance in the market.

Since investments and schemes vary, the interest in NPS schemes is not predetermined.

Greater contributions result in a larger retirement corpus, and the potential for monthly compounding enhances the attractiveness of NPS as a retirement financial plan. Importantly, the interest earned in NPS is entirely tax-free.

National Pension Scheme Account Types

The National Pension Scheme (NPS) offers two primary types of accounts, each serving different purposes and having distinct features:

Tier-I Account

The Tier-I account is the primary NPS account and is mandatory for all individuals who wish to join the NPS. It is designed to encourage long-term retirement savings and has certain restrictions on withdrawals.

Key Features of Tier-I account include:

1. Limited Withdrawals: Withdrawals from this account are generally restricted until retirement. However, partial withdrawals are allowed under specific circumstances like medical emergencies, children’s education, and home purchases.
2. Minimum Contribution: Subscribers are required to contribute a minimum amount annually to keep their Tier-I account active.
3. Tax Breaks: Investments made into the Tier-I account are eligible for tax deductions under Section 80C, and an extra deduction till Rs. 50k is accessible according to Section 80CCD(1B).
4. Maturity Options: On retirement, a portion of the Tier-I account corpus must be used to get an annuity purchase, providing a regular income stream during retirement. The remaining corpus can be withdrawn as a lump sum, subject to tax regulations.

Tier-II Account

The Tier-II account is a voluntary savings account that provides greater flexibility in withdrawals and is designed for short-to-medium-term financial goals. Unlike the Tier-I account, there are no restrictions on withdrawals from this account.

Key Features of Tier-II account include:

1. No Lock-In Period: Tier-II accounts do not have a lock-in period, and subscribers can withdraw the entire corpus at any time.
2. No Minimum Contribution: There is no minimum annual contribution requirement for Tier-II accounts.
3. No Tax Breaks: Contributions to the Tier-II account do not offer tax deductions, and the entire corpus is taxable upon withdrawal.
4. Investment Choices: Subscribers can choose their investment preferences and asset allocation in Tier-II accounts, similar to Tier-I accounts.
5. Can Exist Independently: A Tier-II account can exist independently of a Tier-I account, making it suitable for individuals who want a flexible savings option without the restrictions of the primary Tier-I account.

How to Open an NPS Account Online

An NPS account can be opened in 2 ways:

• Through the NPS portal

How to Open an NPS Account Online: Through the NPS portal

PFRDA regulates NPS activities through the NPS portal. You may create an NPS account using one of two techniques:

Online mode

Anyone can establish an NPS account online.

1. For online registration, go to the eNPS website (https://enps.nsdl.com/eNPS/NationalPensionSystem.html).
2. The NPS account should be connected to your cellphone number, PAN, and Aadhar.
3. A One Time Password will be given to your associated cellphone number to finish the verification.
4. You will get a PRAN after completing registration, which you may use to sign in to your NPS account.

Offline Mode

Points of Presence (PoP) are designated postal offices and banks where you may create an NPS account.

1. Locate the closest PoP and fill up an NPS subscription form. Complete the form and attach copies of your KYC papers, like your PAN card, Aadhaar card, passport, and so on.
2. In case you are a current client of the bank, you are not required to provide the KYC papers because your KYC data already exists in their system.
3. Place your first payment into the account. It cannot be lower than Rs.500 not inclusive of tax. The annual contribution to a Tier I NPS account is Rs.1,000. You will also be required to pay a lump-sum registration charge.
4. Your postal office or bank will provide you with your PRAN. The PRAN plus password required to access your online account will be included in the kit.
5. One may access one’s NPS account using the NSDL NPS site or an online banking account.
6. Originally envisioned solely for federal government personnel, the NPS was later expanded to all people by the PFRDA. As a result, every employee who is self-employed or working privately is eligible for the new pension program. It is also worth noting that the new pension program allows for mobility across different locations and occupations.
7. All federal government personnel (excluding the Armed Services personnel) who entered post January 2004 can create a new pension scheme account, although state government workers may have varying dates.

Login Procedure for the First Time to Your NPS Account

• Navigate to https://enps.nsdl.com/eNPS/NationalPensionSystem.html.
• From ‘Additional Services,’ choose ‘Log in with PRAN/IPIN’.
• Insert your previously utilized ID plus password, accompanied by the captcha.
• Hit the ‘Submit’ button.
• If you lose your password, go to ‘Additional Services’ and select ‘Click Here’.
• A fresh page will be shown. Choose ‘Nodal Office’ or ‘through OTP’.
• Once you select OTP, you must input the OTP sent to your cellphone or e-mail address, as well as your PRAN and birth date.
• In the following step, input the password you wish to employ and verify it. Type the captcha and press the ‘Submit’ button.

Opening of NPS Account

Envisioned initially solely for federal government personnel, the NPS was later expanded to all people by the PFRDA. As a result, every employee who is self-employed or working privately is eligible for the new pension program. It is also worth noting that the new pension program allows for mobility across different locations and occupations.

All federal government personnel (excluding the Armed Services personnel) who entered post-January 2004 can create a new pension scheme account, although state government workers may have varying dates.

Anyone above the age of 18 but younger than the age of 60 can create a new pension scheme account. Subscribers must complete the steps below to create an NPS account:

• Obtain the request form for PRAN.
• Fill in and return the PRAN form.
• Obtain the PRAN card

A photocopy of the PRAN card is required for tier-II account activation. Employees who have enrolled in the new pension system can register a tier II account by presenting the UOS-S10 form, together with a PRAN card plus Rs.1000 to a POP-SP.

Subscribers must obtain a PRAN applicant form, available at every Point of Presence – Service Providers (POP-SP). Subscribers must complete the application form of PRAN, inclusive of information like scheme selection and signature, amongst many other things. Subscribers must provide KYC papers, which include evidence of residence and identification.

Subscribers must present the application form for PRAN to a Point Of Presence – Service Provider after properly completing it.They must also attach KYC documentation with an application form, following which the CRA will mail the PRAN card to the subscribers’ address.

A subscriber can utilize his PRAN at any moment to monitor his transactions online. PRAN Kit includes a PRAN card, the subscriber’s name, a photograph, the father’s name, a signature, and an I-Pin and T-Pin. Individuals can only utilize a single portable PRAN. If subscribers possess several PRANs, the nodal offices will disable one of them.

POP-SP Meaning

Furthermore, government workers may become a member of the new pension system through a Point of Presence – Service Provider (POP-SP).

A Point of Presence – Service Provider (POP-SP) is a point of contact for a subscriber who is not a  government worker and wishes to create a retirement account that is permanent with the CRKA and join the new pension plan.

National Pension Scheme Asset Class

Here are the specific features and benefits of investing in the National Pension Scheme:

Equities (E)

Corporate Debt (C)

Government Securities (G)

Alternative Investment Funds (A)

NPS Fund Managers In India 

Currently, there are 7  Fund Managers. Following is a list of these 7 pensions fund managers who manage investments by NPS subscribers:

• Aditya Birla Sun Life Pension Management
• HDFC Pension Management
• ICICI Prudential Pension Fund Management
• Kotak Mahindra Pension Fund
• LIC Pension Fund
• SBI Pension Fund
• UTI Retirement Solutions

Recently, Axis Asset Management, TATA Asset Management, and Max Life Insurance have also received the necessary approvals to establish a pension fund company. So, the number of fund managers will increase to 10 in India.

Choosing Best Pension Fund Manager To Invest In NPS

As we mentioned earlier, apart from giving you the option of multiple asset classes, NPS also gives you the flexibility to decide how much gets invested in each of these asset classes.

Since each of these asset classes has a different risk-return profile, this flexibility allows you to customize your NPS asset allocation and have it in sync with your risk profile.

Currently, NPS offers you two options to choose the asset allocation for your NPS portfolio – Active Choice and Auto Choice.

If you are unhappy with the performance of the fund Manager, NPS also gives you the option of switching fund managers

Bottom Line

National Pension System (NPS) is a social security scheme that may be accessed online. PFRDA  has control over NPS. Its goal is to provide financial rewards via pension after retirement. The federal government created NPS in 2014. NPS is a scheme based on contributions that offer retirees with returns linked to the market.

If you are looking for the best investment opportunities in India for fixed income besides NPS, then you must invest in the real estate market. A promising avenue within this sector is the realm of structured debt investments, particularly in commercial real estate. Structured debt investments in real estate involve tailored financing solutions designed for commercial real estate projects, providing investors with the opportunity to potentially achieve attractive returns and regular earnings.

 The entry into this investment avenue is accessible with a relatively modest initial amount of 10 lakhs, and it offers the potential for returns ranging from 12% to 20%. These investment opportunities are facilitated through reputable alternative investment platforms like Assetmonk.

Desiring better investments than NPS? Well, look no further for commercial real estate investment is a booming industry right now. Take advantage of this fantastic opportunity to earn passive income with the help of the #1 alternative investment platform, Assetmonk. 

Related Articles

1. NPS Vs PPF: Comparison, Return Rates & Which is Better.
2. NPS Customer Cares Support Toll-Free and Contact Numbers.
3. National Pension Scheme Tier 1 Account (NPS)

How to open NPS account online FAQs

When will one be able to establish a Tier II account?

One can only create a Tier II account if one already has a Tier I account.

What fund managers are permitted to administer NPS funds?

The following fund managers are authorized to manage NPS funds:

• LIC Pension Scheme
• Pension Fund of Kotak Mahindra
• Pension Fund of SBI
• ICICI Prudential Pension Fund is an Indian pension fund.
• Pension Fund of Reliance Capital
• HDFC Pension Management Company
• Pension Fund UTI Retirement Solutions

What fund managers are permitted to administer NPS funds?

 Fund managers permitted to administer NPS funds are

• LIC Pension Scheme
• Pension Fund of Kotak Mahindra
• Pension Fund of SBI
• ICICI Prudential Pension Fund is an Indian pension fund.
• Pension Fund of Reliance Capital

Can I apply for a replica PRAN Card?

Yes, if you misplace your actual PRAN Card, you can obtain a replica by completing the S2 form and sending it to your local POP-SP. The replica PRAN card will get mailed to you after your application has been completed.

What tends to happen if I afford to retire early as a subscriber?

If you retire, you must use 80 percent of your entire pension money accrued to buy annuities and withdraw the residual 20 percent as a single payment.

Can I make changes to the information on my NPS account?

Yes, if any of your personal information changes, like your phone number or bank account information, you can propose a correction by contacting your local PP-SOP. To verify that the information is updated, you must supply the relevant documentation.