NPS, the Indian answer to Social Security!

Government of India introduced the National Pension System (NPS) for new employees of Central Government (except for the Armed Forces), joining Government service on or after January 1, 2004. NPS is regulated by Pension Fund Regulatory & Development Authority  (PFRDA). The PFRDA Act was passed on 19th September, 2013 and the same was notified on 1st February, 2014. NSDL e-Governance Infrastructure Limited (NSDL e-Gov) has been functionaing as a Central Recordkeeping Agency which provides for the core infrastructure for the NPS and is critical for its successful operationalization. The scheme, open to all Indian citizens above the age of 18 is aimed and ideally suited for the youth and middle-age alike. Like any other investment, the NPS works best if one starts planning early for their retirement.

The objective of the NPS is to offer structured retirement benefits to the masses while inculcating a habit of regular savings among them. NPS is a cost effective and transparent platform wherein contributions are invested in various pension fund schemes opted by you as a subscriber. The NPS Trust, monitored by PFRDA, ensures that proper checks and balances are inbuilt within the schemes. You can access your account details online and check your fund value on a day to day basis.

NPS offer two options – Tier I and Tier II. A Tier 1 account is non-withdrawable and is meant to save for post-retirement. Tier 1 accounts are designated as Exempt-Exempt-Taxed (only the amount withdrawn as lump sum is taxed) from a taxation standpoint. A Tier 2 account is a simple voluntary savings scheme which can be withdrawn anytime upon a subscribers required but does not entail any tax benefits.

The process of setting up an NPS account is very simple. You need to apply for a PRAN or Permanent Retirement Account Number with any of the 37,000 touch points called Point of Presence Service Providers (POP-SP). Once allotted, your PRAN does not change irrespective of change of jobs, location or tax status.

For more on the National Pension Scheme, visit http://www.facebook.com/nps.NSDL