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In a country like India, many believe that planning financially for retirement leads to a comfortable and secure later life. If you want to enjoy a good life after retirement without having to work, the Government of India has launched a scheme for you: the National Pension Scheme (NPS). In this article, we provide detailed information about the scheme.
 

What is the National Pension Scheme (NPS)?
 

The National Pension Scheme is a government-run retirement savings scheme. It was launched in 2004 and was initially available only to government employees. Since 2009, it has been open to all Indian citizens between the ages of 18 and 70. The scheme is administered by the Pension Fund Regulatory and Development Authority (PFRDA).
 

Key Features of the National Pension Scheme:
 

Eligibility:
 

The eligibility rules for opening an NPS account are simple. Any citizen of India — including Non-Resident Indians (NRIs) — between 18 and 70 years of age may apply. To open an account, you must complete the KYC (Know Your Customer) process and present valid identity proof such as Aadhaar, PAN, passport, or other acceptable documents. If you meet these conditions, you can open an NPS account and start disciplined retirement savings.
 

Types of Accounts:
 

NPS offers two types of accounts:
 

(i) Tier I Account (Retirement Account — Mandatory)

• This is a mandatory retirement savings account.

• Minimum contribution is ₹1,000 per year.

• It offers tax concessions.

• Funds in this account are locked until age 60, although limited withdrawals are permitted under specific circumstances.

• On maturity, at least 40% of the corpus must be used to purchase an annuity (a pension), while the remaining 60% can be withdrawn tax-free.
   

(ii) Tier II Account (Voluntary Savings — Optional)

• This is an optional savings account that allows you to withdraw funds whenever you wish.

• Each transaction requires a minimum deposit of ₹250.

• This account does not usually offer tax deductions, although government employees may get tax benefits under Section 80C.

• Functionally, it behaves like a mutual fund account, offering liquidity and flexibility.
   

Investment Options in NPS:
 

NPS investments are managed by fund managers appointed by the PFRDA and are invested across equities, government bonds, and corporate bonds. Members can choose between two investment approaches:

Active Choice: You personally decide the asset allocation (equity, government securities, corporate bonds) and the percentage allocation for each asset class.

Auto Choice: Investments are made automatically according to your age — younger investors get a higher equity allocation for potential higher returns, while older investors get a more conservative allocation.
 

Professional Fund Management

PFRDA approves pension fund managers to handle NPS assets. Some of the prominent pension fund managers include:

• SBI Pension Funds

• LIC Pension Fund

• HDFC Pension Fund

• ICICI Prudential Pension Fund

• UTI Retirement Solutions

• Kotak Pension Fund

NPS members can select a fund manager based on preference or performance and may change the fund manager if dissatisfied.

NPS Account Opening Process

You can open an NPS account either online (eNPS) or offline.
 

1. Online Process (eNPS Portal)

To open an NPS account online:

1. Visit the eNPS portal (for example: https://enps.nsdl.com/eNPS/NationalPensionSystem.html) or a related service website.

2. Select the National Pension System option.

3. Choose Individual Subscriber.

4. Enter your PAN/Aadhaar and bank details.

5. Select a fund manager and investment option (Active/Auto).

6. Upload your photo, signature, and KYC documents.

7. Activate the account by paying the minimum contribution.

8. You will receive a PRAN (Permanent Retirement Account Number) — the unique ID for your NPS account.
    

2. Offline Process
 

To open an NPS account offline:

1. Visit an authorized Point of Presence (PoP) such as a bank, post office, or financial institution.

2. Fill out the NPS registration form and provide the required information.

3. Submit KYC documents (Aadhaar, PAN, address proof, etc.).

4. Deposit the minimum investment amount.

5. You will receive a PRAN card linked to your NPS account.

After receiving your PRAN, you can start regular investments via either mode.
 

Advantages of NPS
 

• NPS is market-linked, so it can potentially deliver better returns than many traditional saving instruments.

• Under Sections 80CCD(1) and 80CCD(1B), you can get additional tax benefits (limits vary; check current tax rules).

• Being regulated by the PFRDA ensures a degree of safety and transparency.
   

Disadvantages of NPS
 

• Tier I account funds are locked until age 60, limiting mid-life access to savings.

• At retirement, at least 40% of the corpus must be used to purchase an annuity; this annuity portion may be subject to tax.

• Unlike EPF, PPF, or Sukanya Samriddhi Yojana, NPS does not offer fixed or guaranteed returns.
   

Conclusion
 

The National Pension Scheme is a useful tool for building financial security for retirement. Its long-term horizon allows investors to benefit from equity’s growth potential, while bond allocations provide stability during volatile markets.
 

FAQ:
 

1. Can I open more than one NPS account?

No. Each person is assigned a single PRAN (Permanent Retirement Account Number) that remains with them for life, so you cannot open multiple NPS accounts.
 

2. Can I add nominees to my NPS account?

Yes. You can add one or more nominees to your NPS account.
 

3. Can I change the fund manager for my NPS account?

Yes. You can change the fund manager once per financial year. For both Active and Auto investment options, you can make allocation changes up to twice a year.
 

4. Can I avail a loan against my NPS investment?


No. Unlike some other financial instruments, you cannot take a loan against your NPS corpus.
 

5. Can I withdraw 100% of my investment after retirement?

No. After the age of 60, you can withdraw up to 60% of your total corpus — this amount is generally tax-free — while the remaining 40% must be used to purchase an annuity (regular pension).