New Pension Scheme

What is New Pension Scheme?

The New Pension Scheme was initiated by the Government of India in 2009, to let people avail a pension, post retirement. Currently, only government employees enjoy pension, and this new scheme was introduced to enable people from unorganised sectors to enjoy the benefits of pension. National Pension Scheme is the cheapest pension system operated by the Government of India.

How much does one get at maturity?

The entire money can be withdrawn at a minimum age of 60 years. The more the invested money, the more the accumulated amount and the larger would be the eventual benefit of the accumulated pension wealth.

How to join the New Pension Scheme?

• The Permanent Retirement Account Number (PRAN) application form can be availed from any Point of Presence - Service Providers (POP-SP) one wishes to register with
• The Form can also be downloaded from the website “npscra.nsdl.co.in”.
• After submitting the PRAN application at the POP-SP, the form can be tracked at https://cra-nsdl.com/CRA/pranCardStatusInput.do
• At the time of submitting the form, the first contribution of a minimum of Rs 500 is required.

Advantages

• NPS is transparent and a cost effective system.
• Each employee is identified by a unique number, the PRAN which is portable. 
• NPS is regulated by Pension Fund Regulatory and Development Authority, with transparent investment norms and regular monitoring and performance review of fund managers by NPS Trust.
• There is no direct tax exemption except that the withdrawal amount is free from tax.
• NPS has a low investment charge.

Eligibility Criteria for New Pension Scheme

• The applicant must be an Indian citizen.
• The applicant should be of a minimum of 18 years of age.
• The applicant can be a maximum of 60 years of age.
• The minimum contribution to be paid is Rs. 500.
• The contribution has to be made at least once per year.
• Annual contribution should be minimum Rs. 6,000.
• Annual contribution to the scheme should not exceed Rs. 12,000.

Limitations

• National Pension Scheme has a high lock-in period. The retirement age is fixed at 60 years.
• Up to 10 years, no partial withdrawals are allowed. Partial withdrawal up to 25% of own contribution only is allowed after 10 years for defined expenses.
• After attaining 60 years of age, only 60% of the total corpus amount can be withdrawn.
• At least 40% of the accumulated wealth in the NPS account needs to be utilized for purchase of annuity/pension plan when one turns 60 years. Annuity income is taxable under the head ‘income from other sources’.

Pension plans provide financial security and stability during old age when people do not have a regular source of income. Retirement plan ensures that people live with pride and without compromising on their standard of living during the advancing years. Still, one needs to weigh the pros and cons before investing in NPS.