National Pension System (NPS) scheme is offered by the Government of India and is regulated by Pension Fund Regulatory and Development (PFRDA). It is specifically designed to facilitate the financial concerns of people after retirement. It was launched in January 2004 initially for government employees, however later in 2009, changes were made and the scheme was opened for every section. The scheme lets the people subscribed to it to invest in a pension account along while working. After retiring, the people subscribed to it can withdraw sections from the corpus and use the rest of the corpus for buying an annuity to receive a regular income even after being retired from the job they’ve worked on.
Any Indian citizen who is over the age of 18 years is eligible for this scheme requiring the person to comply with KYC (Know Your Customer) standards. NRIs can also avail of this scheme. However, if NRI is subjected to any change in citizenship status, the account hosted would be shut down. One cannot open more than accounts under this scheme. National Pension System (NPS) Scheme is regulated or administered by the Pension Fund Regulatory and Development Authority (PFRDA). People who have subscribed to the scheme have an option to exit the plan before retiring or choose superannuation.
There are many benefits of signing up for this scheme that is discussed below-
The scheme provides the flexibility of choice by offering two options for investing, i.e., auto choice and active choice. An auto choice is a default option for the account holder(s). Under this option, fund investments are managed by an appointed manager as per the account holder’s age profile. On the other hand, the individual has an option to decide among the available asset classes in which to invest. They can also assign certain varying percentages of contributed funds to be invested in with a maximum cap of 50% Equities and also have an option to switch their manager under certain terms and conditions.
National Pension System scheme allows people to invest systematically through either of the two accounts, i.e., Tier 1 account or Tier 2 account. As per the scheme, subscribers can invest through PRFDA appointed intermediaries like trustee banks, Central Recordkeeping Agency, NPS trust, Custodians, Points of Presence, and Annuity Service Providers.
National Pension System scheme provides an option of partial withdrawal. It offers an option to withdraw the invests partially thus allowing people to meet their financial demands and needs during emergencies under certain conditions. The person willing to withdraw partially should have invested for at least 10 years. If there is a need to avail partial withdrawal facility again, make sure there is a 5-year gap before the previous ones.
One can easily avail tax benefits from the National Pension System scheme.