• NPS (National Pension Scheme) is a government-sponsored retirement scheme, under which an individual can construct a “Retirement Corpus”, in the form of “old age pension”. Any individual (whether an Indian citizen or NRI) who falls between the age of 18 to 65 is eligible for this scheme. This scheme is managed by PFRDA (Pension Fund Regulatory and Development Authority Of India). India has a significant number of senior citizens and a large stratum of them do not have any financial assistance to support themselves in their retirement years. The aim of NPS (National Pension Scheme) is to assist that particular stratum and make them financially independent in their post-retirement years. The broadening of the retirement corpus is ensured via market-linked returns. An individual is required to create an account through PoPs (Points of presence) and the requirement of KYC DOCUMENTATION is very less.

Benefits of NPS (National Pension Scheme)

There are numerous benefits provided by NPS to foster a sense of financial discipline in a working person during his beginning years. Some most important benefits of NPS has been mentioned below:-

  • Nation pension Scheme is a voluntary retirement scheme. An individual can choose to be a part of the scheme during any time of the financial year.
  • It is a very flexible scheme and individuals can select their own investment options and pension fund.
  • It helps an individual to become financially independent in his retirement years.    
  • A working person can invest in this scheme regularly and upon reaching the age of retirement, he can extract up to 60% of the corpus in the form of a fixed amount and use the remaining amount of the corpus for purchasing an annuity, which will assist him in the generation of pension after retirement.
  • By becoming a part of the NPS, an individual has the option to claim extra tax deductions of up to Rs.50,000 under section 80 CCD(1B) , which is above the tax incentive of Rs1.5 lakh, available under section 80(C).
  • NPS helps an individual to defeat inflation by earning gains, which have a direct relationship with the financial market and due to this whole process, an individual can assemble a huge retirement corpus.
  • Because of NPS falling under the authority of PFRDA, an individual has completely transparent investment options, he can regularly monitor his investments and he can also see the performance review of fund managers, which is done by the NPS trust.
  • A person has the option to avail dual benefits under NPS. The first benefit is of “low cost” and the second benefit is of “Compounding”. As the maintenance of the account can be done at a nominal cost, an individual can see his investment growing over a significant period of time, with a compounding effect.
  • An individual can build a highly diversified portfolio, where he has the choice to invest in a combination of equity bonds, Corporate bonds, and government debt.

Features of NPS (National Pension Scheme)

  • An individual has the option to select a pension fund manager of his choice, from the 7 pension fund managers. The pension fund managers have been appointed by the PFRDA, so there no chance of any kind of fraud being committed by them. The list of Pension fund managers has been mentioned below:-

  1. ICICI Prudential Pension Fund
  2. LIC Pension Fund Ltd
  3. Kotak Mahindra Pension Fund
  4. SBI Pension Fund
  5. UTI Retirement Solutions Pension Fund
  6. HDFC Pension Management Company Ltd
  7. Birla Sunlife Pension Management Ltd.

  • NPS is not only for Indian citizens as NRIs can be a part of this scheme also.
  • An individual can trace the route of his portfolio’s progress, in real-time to be assured of the fact that his portfolio is doing well as per his expectations.
  • There are two types of accounts available under NPS, which are known as “TIER I AND TIER II”.
  • Tier I is compulsory for an individual and the decision to invest in TIER II is completely his choice. TIER II acts as the addition of a voluntary savings facility. In the case of the TIER I account, an individual must wait for a minimum period of 10 years from the date of joining, for withdrawal of the cumulated corpus. Where TIER II account, allows an individual to withdraw his investment at any point in time, according to his will. There is a fixed investment amount of Rs.1000, which is to paid annually but in the case of a TIER II account, there are no boundaries as such. The only drawback of a TIER II account is that it does not allow the investor to avail of any sort of tax benefits.
  • With the availability of a TIER-II account, an individual gets the option to place his excess funds.
  • NPS is a completely safe scheme for an individual, as it is backed by the government of India and regulated by PFRDA.
  • It is a highly portable scheme, so if an individual decides to move to a new location for his job or any other purpose, NPS would provide complete arrangements to the individual and it will also make sure of the fact that the individual retains his retirement corpus, which he has built over the years.

Procedure for NPS registration

1) An individual should visit the eNPS portal, which is situated at the official website of the National Pension System

2) Them he should select a particular subscriber type from the available options (Individual Subscriber or Corporate Subscriber).

3) Then he should select his status of residence from the available options (NRI or Indian citizen).

4) Then he should select the Tier I account type and option of choosing “both accounts (TIER I and TIER II)” is also there but the selection of the former account type is mandatory, for savings of long term.

5) Then he should fill out his PAN card details and choose a particular bank or PoP.

6) Then the scanned copy of the PAN card must be uploaded by the individual along with a cancelled cheque

(Image format should be  .jpg, .jpeg or .png and the file size must fall within the limit of 4 kb to 2 MB)

7) Then he should upload his signature and photograph in the same method and format.

8) Then the individual will be taken to a payment portal, where he must pay the required charges by net banking.

9) And when the individual has completed the payment process, then he will receive his Permanent Retirement Account Number.

NPS or national pension scheme is very advantageous for people, who have just started walking on the path of their professional career. With the help of this scheme, they can be independent of their financial woes in their retirement years.

Related Links

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A Complete Guide on KYC Form for Mutual Fund Investments

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