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Retirement Plan

National Pension Scheme

The National Pension Scheme (NPS) is a government-backed retirement savings plan launched by the Pension Fund Regulatory and Development Authority (PFRDA). It aims to provide financial security post-retirement through systematic investments in market-linked funds.

NPS is voluntary for all Indian citizens. It offers tax benefits, flexibility in investments, and a steady pension after retirement.

Key Features of NPS
  1. Dual Benefits: Pension + Investment
  • Helps in retirement planning with market-linked returns.
  1. Flexible Investment Options
  • Choose between Equity, Corporate Bonds, and Government Securities.
  1. Low-Cost Retirement Plan
  • Lowest fund management charges compared to other pension schemes.
  1. Regulated & Transparent
  • Managed by PFRDA-regulated pension fund managers with strict guidelines.
  1. Partial Withdrawal Facility
  • Allowed for education, medical emergencies, and home purchase after 3 years.
  1. Multiple Fund Manager Options
  • Choose from fund managers like SBI, HDFC, ICICI, LIC, and UTI.
Types of NPS Accounts
  1. Tier 1 Account (Mandatory for Retirement Savings)
  • Primary pension account with strict withdrawal rules.
  • Minimum contribution: ₹500 per contribution and ₹1,000 per year.
  • Withdrawal Rules:
    • 60% of corpus can be withdrawn tax-free after 60 years.
    • 40% must be invested in an annuity plan for a regular pension.
    • Early exit (before 60 years) requires 80% to be used for annuity.

 

  1. Tier 2 Account (Optional Savings Account)
  • Works like a regular investment account with no lock-in.
  • No tax benefits (except for government employees).
  • Minimum contribution: ₹250 per transaction.
  • Funds can be withdrawn anytime.

National Pension Scheme Vatsalya:

NPS Vatsalya is a pension scheme for minor citizens till the age of 18 years under the National Pension System (NPS). The scheme is designed to help children develop the habit of saving for retirement from an early age. 

Features of NPS Vatsalya
  • The account is opened by the minor’s guardian in the minor’s name 
  • The minor is the sole beneficiary of the account 
  • The guardian operates the account until the minor reaches the age of 18 
  • The account holder is issued a unique Permanent Retirement Account Number (PRAN) 
  • The guardian can choose a pension fund registered with PFRDA 
  • The guardian can decide how to allocate funds across equity, corporate debt, government securities, and alternate assets 

What happens when the minor attains the age of 18 years? 
  • The account will continue to be operational and will be seamlessly transitioned into a NPS -Tier 1 Account under the All Citizen Model. 
  • Upon transitioning, the features, benefits, and exit norms of the NPS-Tier I for All Citizen Model will apply. 
  • A fresh KYC of the subscriber must be carried out within three months of reaching majority. Contributions to the NPS Tier1 Account will be allowed after the submission of fresh KYC.