Launched by the central government in 2004, the National Pension System (NPS) has gained popularity over the last few years, particularly among those in the private sector with limited retirement saving options. It was initially launched for government employees and later extended to all citizens in 2009. However, the investment rules along with benefits, eligibility, and other factors differ for both government and private sector employees.

What Is the National Pension System?

The National Pension System is a central government-backed investment scheme designed to provide retirement benefits to its subscribers. Through the scheme, individuals can allot funds across asset classes in line with their investment goals. There are two types of options including Tier 1 and Tier 2 accounts.

While Tier 1 pension accounts are primarily focused on saving for retirement, Tier 2 is a voluntary savings account.

The National Pension System is regulated and managed by the Pension Fund Regulatory and Development Authority, as per the PFRDA Act 2013.

The scheme is open to all Indian citizens aged between 18 and 70 years of age. After retirement, up to 60% of the corpus can be withdrawn as a lump sum amount, while the remaining 40% can be used for buying an annuity plan. The NPS investments also qualify for tax benefits.

Eligibility Criteria

• The applicant must be a citizen of India whether resident, non-resident, or an Overseas Citizen of India (OCI).
• The NPS subscribers need to provide valid documents for KYC compliance as per the Subscriber Registration Form.
• Those from Hindu Undivided Families and Persons of Indian Origin are not eligible to subscribe to NPS.
• Central government employees joining on or after January 1, 2004, are covered under the NPS scheme.
• Employees under the state government adopting NPS are covered under the scheme.
• Likewise, it is extended to the employees of State Autonomous Bodies that have adopted the system.
• As per the corporate model, private sector employees can also open an NPS account if their organisation has adopted the scheme.
• Entities registered under the Companies Act 2013, bodies established under any Act of Parliament, registered partnership firms, limited liability partnerships, trusts, society and international organisations (UN/WHO/World Bank/ADB /IMF), among others, are allowed to opt for NPS scheme for their employees.