Am I Eligible to Invest in the National Pension Scheme (NPS)?

The National Pension Scheme, or NPS, is a voluntary retirement plan, which encourages working professionals to save money for retirement.

Introducing National Pension Scheme

The National Pension Scheme is a Government of India initiative. It was started in 2003. Initially, only the employees of the government sector were eligible to avail of the scheme. In 2009, however, changes were made to the scheme. These changes now allowed people working in the public, private, and unorganised sectors (except the armed forces) to benefit from this scheme.

Indian citizens aged 18 to 60 are eligible for this scheme. A minimum of INR 6,000 per year or at least INR 500 per month in installments must be invested to meet the eligibility of this scheme.

The National Pension scheme has a maturity of 60 years, which can be extended up to 70 years. The scheme can help you secure funds after retirement by taking good financial decisions.

All these factors make the National Pension Scheme a sustainable solution for senior citizens who might face financial troubles after retirement.

The interest rates offered under the NPS are 8 to 10%, and the NPS savings are pooled in a pension fund. The NPS is regulated by the Pension Fund Regulatory & Development Authority (PFRDA).

The NPS allows a partial withdrawal of about 25% of the total amount after three years of opening an account. This is allowed only under special situations like purchasing a home, funding your child’s higher education, or health emergencies.

Benefits of the National Pension Scheme

The National Pension Scheme offers a range of benefits. This is why many people have started investing in NPS since it came around. Here are some reasons to start investing in NPS:

• NPS offers flexibility: The National Pension Scheme offers a wide range of investment options like pension funds (PFs). These can be used for planning future finances. As an investor, you can also change the of investing.
• Your NPS account can be easily monitored.
• NPS offers simplicity: Opening an NPS is easy if you have a PRAN (permanent retirement account number). With your unique PRAN number, which remains the same for a lifetime, the whole process becomes quick and easy.
• You can open two kinds of accounts under NPS: Tier 1 is a non-withdrawable permanent account. Tier 2 is a voluntary withdrawable account, which can only be activated when a Tier 1 account exists.

• Portability: NPS is seamless and has immense portability. Even if you switch between jobs or locations, your NPS account can be transferred. A very hassle-free system allows changes to be made to the account just as quickly and easily.

• Well regulated: It is very well regulated by PFRDA. Opening an NPS account is transparent, enables regular monitoring, and offers the least account maintenance cost.
• Compounding and low-cost investment: An NPS account requires minimum investments. And the account maintenance cost is low. In addition, the benefits of compounding interests are highly beneficial to you as investors.
• Easy online access: Online platforms make managing and investing in NPS easier and more convenient.
• Good returns/interests: A portion of your investment goes into equities investment. This kind of investment offers high returns as compared to other traditional tax-saving investment schemes. The interest rates are as high as 9-12%.
• Tax benefits of NPS: Accounts with a maximum limit of INR 1.5 lakh are eligible for tax exemption under Section 80C of the Income Tax Act.
• The 100% withdrawal after 60 rule prevents the temptation to withdraw money before maturity. As an investor, you get a lump sum of money only after 60.
• Risk assessment with NPS is very accessible.

Eligibility Criteria for Investing in National Pension Scheme

Let us come back to the initial question, i.e., are you eligible to invest in NPS? Check these criteria out to know your eligibility. You can also find out whether you should or should not invest in NPS:

• Aspiring investors should be Indian citizens.
• Even NRIs are eligible to invest in NPS.
• The investor should be 18 to 60 years of age when they apply.
• KYC (Know your Customer) submission is necessary.
• You should have a subscriber registration form. It needs to be submitted with proof of identity, address, date of birth certificate, and point of presence.
• A twelve-digit PRAN number is necessary.

If you meet these criteria, you can start investing in NPS.

How to open a National Pension Scheme Account

A National Pension Scheme account can be opened offline or online. The online process involves the following steps:

• You can create an account on the NPS official website in less than 30 minutes.
• You must link your PAN, Aadhar, and registered mobile number with your NPS account.
• An OTP will be sent to your registered mobile number. It will let you verify yourself and generate NPS login details.

To open an account offline, you can follow these steps:

• Find a point of presence or POP registered with the Pension Fund Regulatory and Development Authority
• Collect a subscriber and submit it along with the KYC paper 
• Invest with an initial amount that lets you get a PRAN or Permanent Retirement Account Number

The Indian economy is advancing in every sector. There is a growth in investments and awareness towards saving. The future, however, is unpredictable. So you must plan.

Piramal is a leader in the investment market. Our experts can help you invest right. You can find more information and guidance about personal loans and finance at www.piramalfinance.com.