National Pension Scheme (NPS)
Old age is the most helpless time in a person’s life. It is that time of life when most people need someone to depend on, in order to lead a happy healthy life. But there is no guarantee that you will have someone dependable to rely on in your old age. Moreover, financial needs become a matter of great concern during this time. Keeping this in mind, the Government of India introduced a social security scheme to assure you a steady financial support after your retirement.
The social security scheme introduced by the Government is known as the New Pension Scheme. It ensures a steady flow of income after you retire. It is especially beneficial for those who were self employed throughout their lives or do not have a PPF account activated by their employer(s).
So, by now if you have decided to open an NPS account for yourself, here we will guide you on how to open the account.
Open NPS Account
There are two types of accounts offered by the National Pension Scheme. The first one is Tier- I account. The second one is Tier-II account. Tier-I account is a compulsory account in which you are not allowed to withdraw money. Only when you are 60 years old and after the pension scheme policy has reached maturity, you will receive the money provided your account was active till then. It is mandatory to have a Tier- I account if you want to open a Tier-II account with the National Pension Scheme. This is a voluntary account. The Tier-II account allows you to withdraw money in case of any emergency.
The Pension Fund Regulatory Development Authority in India has appointed seven fund managers to take care of the retirement corpus of the customers. However, the funds of the employees belonging to non-government organizations are managed by the following six managers appointed by PFRDA:
- SBI pension funds Limited
- UTI Retirement solutions Limited
- Reliance capital Asset Management Company Limited
- IDFC Asset management Company Limited
- ICICI Prudential life Insurance Company Limited
- Kotak Mahindra Asset management Company Limited
You May Also Like: Why to open a National Pension Account?
A number of Points of Presence (POP) are constituted to be used by the investors as the customer interface. The following list shows some of the Points of presence that you can choose from:
- Allahabad bank Limited
- Bajaj Allianz General Insurance Co Ltd.
- Axis Bank Ltd.
- Computer Age Management Services Private Ltd.
- IDBI Bank Ltd.
- ICICI Bank Ltd.
- Kotak Mahindra Bank Ltd.
- IL&FS Securities Services Ltd
- UTI Asset Management Company Ltd.
- The South Indian Bank Ltd.
In order to open a NPS account, first of all you have to choose any one of the above Pop and a fund manager. After that, you have to fill up a form and pay the initial amount of Rs. 500/- to open a Tier I Account with the national Pension Scheme. In the form, you have to specify the premium payment mode or frequency you opt for. Based on that, your premium amount will be decided. If you, for instance, opt for a monthly premium mode, you will contribute at Rs. 500/- per month. However, it is mandatory to have at least Rs.6000/- in your account be the end of each year to keep your new pension scheme account active.
This pension scheme allows you to choose from three asset classes so that you can enjoy a diversified asset allocation experience. You are allowed to switch fund any time you want. You can change your fund manager as well.
As soon as, your national Pension Scheme account is activated, you Permanent retirement Account Number is generated. This number will remain the same no matter how many times you change your jobs, or change your fund manager or switch funds etc. You will require this PRAN number at the time of receiving your pension money.
There are several advantages as well as disadvantages of investing in the national pension scheme. If you do not want to invest in this pension scheme, you can always opt for the pension plans available in the market. Nowadays, there are a number of life insurance companies that offer pension plans to meet the various need of the customers.
In terms of benefits the National Pension scheme is no less than the pension plans offered by the life insurance companies in India. It allows investors to allocate their funds based on their risk tolerance and investment strategy. On maturity, you can either withdraw the entire retirement corpus as the lump sum or you can opt for pension annuity that will be paid out automatically on a regular basis.
You May Also Like to Read: New Pension Scheme for High-Income Earners