National Pension Scheme or NPS is a Government Scheme aimed to help individuals with a steady income after retirement. It was initially launched for only Central Government employees, but later was opened up for all individuals.
What are the investment options available under NPS?
Every subscriber investing in NPS gets two options – active choice and auto choice – for funds allocation. Before understanding these options, it is important to understand the asset classes under NPS investments:
- E – Investments in stocks. The maximum limit is 50%.
- C – Corporate debt funds that invest in bonds issued by the companies
- G – Investments in gilt funds in government securities.
Investment Options Available –
- Auto Choice: This is a default option for life cycle funds where the funds are automatically managed by the authority based on the age of the investor.
- Active Choice: By choosing this option, an investor can choose the percentage of contribution in available asset classes.
What are the types of account available under NPS?
The government offers 3 account options under NPS:
Tier 1 NPS Account:This type of account is compulsory for all central government employees to contribute 10% of their basic monthly salary along with DA and DP. Under this, the subscriber cannot withdraw funds before the age of 60. The minimum amount that one needs to invest in Tier 1 account is Rs. 6000 in a year.
Tier 2 NPS Account:It is a voluntary saving account where the subscriber is free to withdraw money at any time. In this, the minimum amount to open the account is Rs. 1000 and the minimum balance required at the end of year is Rs. 2000.
Swavalamban Scheme:This scheme is for less fortunate people where the government pays Rs. 1000 per year for 4 years. This is for those individuals who are not employed on a regular basis in an autonomous body
Which banks or financial institutions are a part of NPS?
Here is the list of the empaneled banks:
- Allahabad Bank
- Andhra Bank
- Bank of India
- Bank of Maharashtra
- Corporation Bank
- Dena Bank
- HDFC Bank Limited
- IDBI Bank Limited
- Indian Bank
- Kotak Mahindra Bank Limited
- Oriental Bank of Commerce
- State Bank of Hyderabad
- State Bank of India
- State Bank of Patiala
- Syndicate Bank
- Tamil Nadu Mercantile Bank Ltd
- Karur Vysya Bank
- The Lakshmi Vilas Bank Limited
- The South Indian Bank Limited
- UCO Bank
- United Bank of India
- Vijaya Bank
What is PRAN?
In order to avail the benefits of NPS, PRAN or Permanent Retirement Account Number is a must. It is like a unique PAN card for retirement which contains your PRAN number, name, father's name, photograph and signature/thumb impression.
How to apply for PRAN card?
Following are the ways to apply for PRAN card:
- Online: Visit the official website of NSDL, download the form, fill it and submit it online. The nodal office generates the Permanent Retirement Account Number.
- Offline: Download the form from NSDL website, fill it, attach photocopy of your KYC forms and send it to the address – NSDL e-Governance Infrastructure Limited, 1st Floor, Times Tower, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai – 400 013.
What is the rate of interest offered under National Pension Scheme?
NPS does not have any specific interest rates due to multiple investment options. However, it can be anywhere between 12% to 14% based on the chosen investment option. It is projected that this scheme earns more than other retirement schemes but there is not particular interest rate figures.
What is the difference between NPS and APY?
National Pension Scheme and Atal Pension Yojana both are government schemes to provide you with financial security after retirement. However, there are few differences as stated below:
- NPS is targeted for people between the age group of 18 to 55 while APY is targeted to the age group of 18 to 40.
- NPS is available for both Indian residents and NRI, unlike APY which is only available for Indian residents.
- APY has 5 pension slabs i.e. Rs. 1000, Rs. 2000, Rs. 3000, Rs. 4000 and Rs. 5000. While NPS the pension slab is decided by the fund manager's performance.
- APY has no tax benefits while in NPS, you get a tax rebate of upto Rs. 2 lakh
What are the withdrawal rules in case of voluntary retirement?
In case the subscriber is a government employee, then minimum 80% amount should be invested in annuity. In case the accumulated pension is less than Rs. 10 lakh, then the subscriber can withdraw the complete amount.
In case the subscriber is not a government employee, then the withdrawal rules are same as above in addition that the individual should have maintained the account for at least 10 years.