National Pension Scheme – Benefits, Process & Types

Last Updated at: April 06, 2020
166
National Pension Scheme

The National Pension Scheme more popularly known as the NPS is a sort of voluntary investment plan. It helps retired professionals lead a financially secured life in India. This long-term investment scheme functions under the Pension Fund Regulatory and Development Authority. Let’s see about the National Pension Scheme and why it is so important.

  1. What is the National Pension Scheme?

  2. Who all should invest in the National Pension Scheme?

  3. NPS – Benefits and Features

  4. How to open a National Pension Scheme SBI account

  5. Fund Managers Available in the National Pension Scheme

 

What is the National Pension Scheme?

The National Pension Scheme, or NPS, is a voluntary, social security plan developed by the Government of India. It is to help the citizens lead a comfortable life post-retirement. The scheme is open to all kinds of employees across the private, unorganized, organized, and public sector, making it a very accessible and reliable program. The plan motivates employees to invest a part of their regular salary in a notified pension account, while they are employed. Post-retirement, these people can withdraw a specified percentage of their savings at regular intervals as monthly pension. While the scheme was earlier offered only to employees who served the Central government, due to its success the PFRDA has now opened it to employees across sectors. Furthermore, national pension scheme returns are exempt from tax as they come under Section 80C and Section 80CCD.

Who all should invest in the NPS?

  1. People who wish to start planning for their retirement early
  2. Low-risk individuals who wish to play it safe, rather than invest in stocks
  3. Individuals in the private sector as they do not normally get a monthly pension
  4. People who want to enjoy the tax benefits under Section 80C 
  5. Individuals who do not have enough knowledge regarding the stock market
  6. People who don’t want to pay hedge brokers and investment agencies to invest in their behalf
  7. The subscriber must be above the age of 18 and below the age of 65 while submitting their application
  8. Individuals of unsound mind  cannot apply

Get FREE legal advice now

Benefits of NPS

  • A part of the money you invest in NPS goes towards equities, and they offer returns much higher than those offered by schemes such as PPF. 
  • Gives individuals return up to the likes of 9% annually.
  • Individuals can change the fund manager if they are not happy with the performance of their assets
  • Equity exposure caps come in at around 75% to 50%, while for government employees, the cap is usually 50%. For individuals above the age of 60, the cap stands fixed at 50%. 
  • Tax benefits amounting to a maximum of INR 2 lakhs annually as per Section 80C
  • Serves as a regular monthly pension, as people are not allowed to withdraw their entire savings in one go after retirement.
  • Furthermore, once you have regularly invested for 3 years, you are given the option of withdrawing 25% of your money, for special purposes such as children’s education, marriage, and health emergencies.
  • Since the scheme allows you to invest a maximum of 50% of your savings in equities, it reduces risk with regards to your investments.

How to open a National Pension Scheme SBI account

Offline Process

  • Find your nearest Point-of-Presence, which is most likely a bank that supports the scheme
  • Ask for a subscriber form for a National Pension Scheme account
  • Fill in the form with the required details
  • Along with the form, submit the required KYC documents
  • Make the mandatory annual investment (INR 500 monthly/ INR 250 monthly/ INR 1,000 annually)
  • Note down the Permanent Retirement Account Number the bank gives you for future references
  • Pay the registration fees of INR 125

Online Process

  1. Go to the official website of the National Pension Scheme initiative- enps.nsdl.com
  2. Create an account on the website
  3. Link your account to your PAN, registered mobile number and Aadhaar card
  4. Validate your account using an OTP sent either to your registered email ID or mobile number
  5. Note down the Permanent Retirement Account Number registered for future references and logins
  6. Make your payments using the Net banking option

Types of NPS Accounts 

Particulars

Tier-I

Tier-II

Status Default Voluntary
Withdrawals Not allowed Allowed
Tax Benefits Up to INR 2 lakh exempted Government employees- INR 1.5 lakhs exemption

Other employees- No benefits

Minimum Contribution INR 500/INR 1000 per annum INR 250
Maximum contribution No limit No limit

 

Fund Managers Available in the National Pension Scheme

  1. ICICI Prudential Pension Fund 
  2. HDFC Pension Management
  3. Kotak Mahindra Pension Fund 
  4. LIC Pension Fund
  5. SBI Pension Funds 
  6. UTI Retirement Solutions
  7. Birla Sunlife Pension Management

 

0

National Pension Scheme – Benefits, Process & Types

166

The National Pension Scheme more popularly known as the NPS is a sort of voluntary investment plan. It helps retired professionals lead a financially secured life in India. This long-term investment scheme functions under the Pension Fund Regulatory and Development Authority. Let’s see about the National Pension Scheme and why it is so important.

  1. What is the National Pension Scheme?

  2. Who all should invest in the National Pension Scheme?

  3. NPS – Benefits and Features

  4. How to open a National Pension Scheme SBI account

  5. Fund Managers Available in the National Pension Scheme

 

What is the National Pension Scheme?

The National Pension Scheme, or NPS, is a voluntary, social security plan developed by the Government of India. It is to help the citizens lead a comfortable life post-retirement. The scheme is open to all kinds of employees across the private, unorganized, organized, and public sector, making it a very accessible and reliable program. The plan motivates employees to invest a part of their regular salary in a notified pension account, while they are employed. Post-retirement, these people can withdraw a specified percentage of their savings at regular intervals as monthly pension. While the scheme was earlier offered only to employees who served the Central government, due to its success the PFRDA has now opened it to employees across sectors. Furthermore, national pension scheme returns are exempt from tax as they come under Section 80C and Section 80CCD.

Who all should invest in the NPS?

  1. People who wish to start planning for their retirement early
  2. Low-risk individuals who wish to play it safe, rather than invest in stocks
  3. Individuals in the private sector as they do not normally get a monthly pension
  4. People who want to enjoy the tax benefits under Section 80C 
  5. Individuals who do not have enough knowledge regarding the stock market
  6. People who don’t want to pay hedge brokers and investment agencies to invest in their behalf
  7. The subscriber must be above the age of 18 and below the age of 65 while submitting their application
  8. Individuals of unsound mind  cannot apply

Get FREE legal advice now

Benefits of NPS

  • A part of the money you invest in NPS goes towards equities, and they offer returns much higher than those offered by schemes such as PPF. 
  • Gives individuals return up to the likes of 9% annually.
  • Individuals can change the fund manager if they are not happy with the performance of their assets
  • Equity exposure caps come in at around 75% to 50%, while for government employees, the cap is usually 50%. For individuals above the age of 60, the cap stands fixed at 50%. 
  • Tax benefits amounting to a maximum of INR 2 lakhs annually as per Section 80C
  • Serves as a regular monthly pension, as people are not allowed to withdraw their entire savings in one go after retirement.
  • Furthermore, once you have regularly invested for 3 years, you are given the option of withdrawing 25% of your money, for special purposes such as children’s education, marriage, and health emergencies.
  • Since the scheme allows you to invest a maximum of 50% of your savings in equities, it reduces risk with regards to your investments.

How to open a National Pension Scheme SBI account

Offline Process

  • Find your nearest Point-of-Presence, which is most likely a bank that supports the scheme
  • Ask for a subscriber form for a National Pension Scheme account
  • Fill in the form with the required details
  • Along with the form, submit the required KYC documents
  • Make the mandatory annual investment (INR 500 monthly/ INR 250 monthly/ INR 1,000 annually)
  • Note down the Permanent Retirement Account Number the bank gives you for future references
  • Pay the registration fees of INR 125

Online Process

  1. Go to the official website of the National Pension Scheme initiative- enps.nsdl.com
  2. Create an account on the website
  3. Link your account to your PAN, registered mobile number and Aadhaar card
  4. Validate your account using an OTP sent either to your registered email ID or mobile number
  5. Note down the Permanent Retirement Account Number registered for future references and logins
  6. Make your payments using the Net banking option

Types of NPS Accounts 

Particulars

Tier-I

Tier-II

Status Default Voluntary
Withdrawals Not allowed Allowed
Tax Benefits Up to INR 2 lakh exempted Government employees- INR 1.5 lakhs exemption

Other employees- No benefits

Minimum Contribution INR 500/INR 1000 per annum INR 250
Maximum contribution No limit No limit

 

Fund Managers Available in the National Pension Scheme

  1. ICICI Prudential Pension Fund 
  2. HDFC Pension Management
  3. Kotak Mahindra Pension Fund 
  4. LIC Pension Fund
  5. SBI Pension Funds 
  6. UTI Retirement Solutions
  7. Birla Sunlife Pension Management

 

0

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