The National Pension System is an attempt towards providing adequate retirement income to every citizen of India. NPS aims at ensuring financial security to every citizen by encouraging them to start contributing towards the old age saving.

NPS has been designed to enable the subscribers to make optimum decisions regarding their future through systematic savings during their employment. NPS seeks to inculcate the habit of saving for retirement amongst the citizens.


Let us look at some of the basic features of NPS:

  • You can subscribe to NPS through various Points of Presence (PoP) which mostly covers banks and certain other financial entities. You will be allotted a Permanent Retirement Account Number (PRAN) which is a unique number and valid across locations.
  • PRAN provides access to two types of accounts:
    • Tier I: This is a non-withdrawable account in which your contributions will be deposited.
    • Tier II: Tier II account is a voluntary savings account in which you can deposit as well as withdraw at any point. It works like a mutual fund. However, one cannot have a Tier II account without a Tier I account.
    • NPS account can be opened by people aged between 18 years and 60 years.
    • For Tier 1 account, the minimum contribution is Rs 6,000 in a year. The minimum amount per contribution is Rs 500 and there should be at least 1 contribution per year.
    • There are 8 pension fund managers (PFM) and money can be invested with any one of the 8 PFMs. There are 7 annuity service providers and one can opt for annuity with either of them.
    • The following two investment choices are available in NPS:
  • Active Choice: Individual Funds (Asset class E, Asset class C and Asset class G) and
    • Auto Choice: Lifecycle fund
    • In Active choice, you have the option to actively decide as to how your NPS contribution is to be invested in the following three asset classes:
  • Asset Class E: Investments in predominantly equity market instruments (maximum allocation of 50 per cent)
  • Asset Class C: Investments in fixed income instruments other than Government securities (maximum allocation of 100 per cent)
  • Asset Class G: Investments in Government securities (maximum allocation of 100 per cent)
  • In the Auto Choice option, your funds will be invested across various asset classes in a lifecycle fund as per a pre-defined portfolio wherein the PFM shall invest your contribution based on the asset allocation table formulated by PFRDA (based on your age).
  • If you withdraw your money before 60 years of age, you are permitted to take only 20 per cent lump sum and the remaining has to be used to purchase an annuity.
  • Beyond the age of 60, you can take up to 60 per cent in lump sum or on a phased manner up to 70 years of age and buy annuity for the balance 40 per cent.

In case of death, 100 per cent of the corpus will be available to the nominee.