About NPS

The New Pension System reflects Government’s effort to find sustainable solutions to the problem of providing adequate retirement income. Since 1st April, 2008, the pension contributions of all the citizens of India by the New Pension System (NPS) are being invested by professional Pension Fund Managers in line with investment guidelines of Government applicable to Non-Government Provident Funds.
1. Each member of the New Pension Scheme will be allotted a unique Permanent Retirement Account (PRA) Number. This Pension System will initially be based on two types of sub-accounts created by individual members:
(a) Tier-I non-withdraw able and tax deferred pension account (for all individuals), and
(b) Tier-II withdraw able savings account with no tax advantages (for all individuals subject to minimum deposits per year in the Tier-I account).
2. This PRA will stay with the member regardless of where he stays or works – including spells of unemployment, self-employment , change in job or location. The member will be able to use Pension Service Providers (POPs) to access this system for opening a PRA, accreting new contributions, receiving accounts or system information and for obtaining retirement benefits.
3. A member will have complete control on how his contributions and savings in his PRA are managed by selecting a professional Pension Fund Manager (PFM) from a pool of PFM’s.
4. On retirement, the member will be able to use a part of the savings accumulated over the years in his PRA to buy an annuity as a way to obtain consumption for the rest of his life.
This scheme will target two categories of participants (members):
a) It will be applicable to all employees of the Central Government (excluding Armed Forces) who have joined service after 01 January 2004.
Every employee may voluntarily invest either in Tier-I or in Tier-II. The fees and charges levied by POPs /CRA /PFMs for all transactions on Tier-II will be borne by the employee. If a government employee decides to resign from service, his pension wealth and his PRA will be unaffected.
b) The second category of members will include all other Citizens of India including Non-Resident Indians (NRIs) who will participate in this scheme on a voluntary basis. These members will be free to decide the amount and periodicity of contributions into these accounts.
Pension Fund Regulatory and Development Authority (PFRDA)is a prudential regulator for the NPS which was established by the Government of India on 10th October 2003 to promote old age income security by establishing, developing and regulating pension funds, to protect the interests of subscribers to schemes of pension funds and for matters connected therewith or incidental thereto.
PFRDA has established the NPS Trust under Indian Trust Act 1882 which is responsible for taking care of funds under the NPS. The Trust holds an account with the Bank of India , which is designated as the NPS Trustee Bank.
Functions of NPS Trust
a) Call for any information or report etc from PF Trustee Bank and Custodian.
b) Issue directions to PF for protecting the interest of subscribers.
c) Appoint a panel of independent auditors to undertake compliance audit.
d) Verify that the Trustee Banks and PFs are strictly performing as per the provisions of the agreement.
Central Recordkeeping Agency (CRA)
NSDL has been appointed as the CRA which provides periodic consolidated PRAN statement, performs centralised record keeping, administration and customer service functions for all the subscribers.
Services provided by CRA:
a) Providing subscribers with periodic PRAN account statement.
b) CRA sends the status of the grievances to the subscriber for the requests registered by them.
c) Acting upon the instructions of subscribers.
d) Provision of Retirement Account Information to subscriber as to pension wealth accumulated or withdrawable amount.
NPS Trustee Bank
Bank of India is functioning as a NPS Trustee Bank, that would manage the banking of pension funds , the schemes , the guidelines issued by PFRDA, Ministry of Finance and Govt of India.
Pension Fund (PFs)/ Pension Fund Managers (PFMs)
Appointed PFs would manage the retirement saving of subscribers as per the guidelines issued by the Govt/PFRDA. NPS allows you to choose from anyone of the following six entities:
  • HDFC Pension Management Co. Ltd.
  • ICICI Prudential Pension Fund Management Co. Ltd.
  • Kotak Mahindra Pension Fund Ltd.
  • LIC Pension Fund Ltd.
  • SBI Pension Funds Pvt. Ltd.
  • UTI Retirement Solutions Ltd.
  • Birla Sunlife Pension Management Ltd
Point of Presence (POP)
POP act as the customer interface for the Non-Government Subscribers/Individual Citizens who wish to open Permanent Retirement Account(PRA) with Central Recordkeeping Agency (CRA) for the purpose of subscribing to the New Pension System(NPS).
Functions of POP
a) Verification of documents & collect cheques, cash etc.
b) Updating files to CRA
c) Maintaining records of all transactions as per PML act 2002
d) Subscriber Servicing
e) Grievance Handling
Branches of the registered POP’s designated as POP Service Providers (POP-SP) will act as the initial point of contact and collection point for all citizens other than Government Employees desiring to obtain a Permanent Retirement Account Number (PRAN) under NPS.
Annuity Services Provider (ASP)
Responsible for delivering a regular monthly pension to the subscriber for his/ her life.
Vesting Criteria Benefit
At any point of time before 60 years of age You would be required to invest atleast 80% of the pension wealth to purchase a life annuity from any IRDA. Rest 20%
On attaining the age of 60 years & upto 70 years At exit you would be required to invest minimum 40% of your accumulated savings (pension wealth) to purchase a life annuity. You may choose to purchase an annuity for an amount greater than 40%. The remaining pension wealth can either be withdrawn in a lump sum on attaining the age of 60 or in a phased manner between age 60 & 70, at the option of the subscriber.
Death due to any cause In such cases, option will be available to the nominee to receive 100% of the NPS pension wealth in lump sum.

  • Individuals can normally exit at or after age 60 years from the pension system. At exit, the individual would be required to invest at least 40 percent of pension wealth to purchase an annuity.