Benefit From the Government’s Pension Scheme Even in Private Jobs

The National Pension System (NPS) is a voluntary pension scheme introduced by the Government of India for all citizens.

Its objective is to provide a pension with market-based returns to individuals in their old age.

The implementation of the NPS is done through appointed branches of banks.

To ensure a regular income in old age that can sustain individuals’ lives comfortably even after retirement, the government has made various efforts. This concern applies to both private sector employees and individuals in business. The responsibility for the welfare of elderly people lies not only with society but also with the government. To address this concern, the government introduced the National Pension System (NPS) for all citizens. The pension funds under the NPS are regulated and managed by the Pension Fund Regulatory and Development Authority (PFRDA). Once a subscriber, meaning a person who avails the benefits of the scheme, completes the age of 60, the NPS provides a pension income to support them in their old age.

The National Pension System (NPS) is a scheme in India that offers a voluntary pension system. It is available to all citizens between the ages of 18 and 60. The implementation of the NPS is done through designated branches of banks known as Point of Presence Service Providers (POP-SP). These branches accept applications and facilitate the creation of Permanent Retirement Account Numbers (PRAN) in association with the Central Record keeping Agency (CRA). The PRAN is a unique account number mentioned for all future transactions.

There are two types of accounts in NPS:

Tier-I and Tier-II. Tier-I account is a retirement account where the subscriber cannot withdraw the accumulated savings until the age of 60, except in certain circumstances. It primarily focuses on providing a pension in the form of a regular income after retirement.

Under Tier-I:

• Minimum contribution at the time of opening an account: INR 500/-
• Minimum contribution per year: INR 500/-
• Minimum balance required at the end of the financial year: INR 6,000/-
• Minimum number of contributions in a year: 1

A subscriber can exit the scheme only after attaining the age of 60. At that time, they are required to utilize at least 40% of the accumulated pension wealth for purchasing an annuity plan. They also have the option of 100% annuitization of the corpus.

Tier-II account, on the other hand, is a voluntary savings account that allows withdrawals without any restrictions. It provides more flexibility for subscribers to manage their investments.

Under Tier-II:

• Minimum contribution at the time of opening an account: INR 1,000/-
• Minimum contribution per year: INR 250/-
• Minimum balance required at the end of the financial year: INR 2,000/-
• Minimum number of contributions in a year: 1

For both Tier-I and Tier-II accounts, a combined application can be submitted at the time of account opening, with a minimum contribution of INR 1,500/-.