NPS

Page Title

Home / NPS

NPS

NPS stands for the National Pension System, which is a voluntary, long-term retirement savings scheme designed to enable systematic savings for individuals. It is a government-backed pension program in India that was launched in 2004. The scheme is regulated and managed by the Pension Fund Regulatory and Development Authority (PFRDA).

Link Name

Key Features Of The National Pension System (NPS) Include:

  • Voluntary Participation: NPS is open to all Indian citizens, both resident and non-resident, between the ages of 18 and 65. It is a voluntary scheme, allowing individuals to choose whether or not to participate.

  • Long-Term Savings: NPS is designed as a long-term retirement savings scheme. It encourages individuals to contribute regularly during their working years to build a corpus that can be utilized during retirement.

  • Tiered Structure: NPS has a tiered structure consisting of two main accounts:
    • Tier-I Account: This is a mandatory, long-term retirement account with restrictions on withdrawals. The contributions are locked in until retirement, and only a portion can be withdrawn as a lump sum at the time of retirement.
    • Tier-II Account: This is a voluntary, short-term savings account that provides more flexibility. Unlike the Tier-I Account, there are no restrictions on withdrawals from the Tier-II Account.

  • Flexibility in Contributions: Subscribers have the flexibility to decide the amount and frequency of contributions. They can choose to contribute regularly or make lump-sum contributions.

  • Multiple Fund Options: NPS offers a choice of investment options to subscribers. They can allocate their contributions across different asset classes, including equity, corporate bonds, and government securities. This choice allows individuals to manage risk based on their risk tolerance and investment goals.

  • Professional Fund Management: NPS funds are managed by professional fund managers appointed by pension fund managers (PFMs). Subscribers can choose their PFM based on their preferences.

  • Tax Benefits: Contributions made to the NPS are eligible for tax benefits under Section 80CCD of the Income Tax Act. Additionally, there is an exclusive deduction for self-employed individuals under Section 80CCD(1B) for contributions to the NPS Tier-I Account.

  • Portable and Transferable: NPS is a portable scheme, meaning that subscribers can continue contributing to the same NPS account, even if they change jobs or locations. It is also transferable across PFMs.

  • Annuity Options: At the time of retirement, subscribers can use a part of the accumulated corpus to purchase an annuity, which provides a regular pension income. Subscribers have the flexibility to choose from different annuity options.

  • Online Access: NPS provides online access to subscribers, allowing them to check their account balance, view transaction statements, and make changes to their investment preferences.

NPS aims to address the retirement income needs of individuals by encouraging regular savings and providing a flexible and transparent pension system.