Investing in National pension scheme-Here is how to do it

(Last Updated On: October 6, 2016)

NPS stands for National Pension Scheme introduced by the Indian Government. NPS is a retirement saving plan for an employee but built by both employer and employee. It is payable to the employee at the time of retirement. The main objective is to empower employees financially after retirement. This is applicable for central or state government officials or common citizens who are employed.

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In the following guide, you will learn how to invest in NPS. Although, this scheme is for everyone but most people have no clue about its working. After reading this guide, you have a precise idea about making the investment in NPS.
Shall we begin!

Who Can Invest In NPS?

All citizens and State/central government officials having age between 18 – 60 years can apply for National Pension Scheme. As this scheme is recently updated, so old pension account holders need to make fresh registration invest in NPS.

How Does NPS Work?

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The most crucial and confusing part is the investment options. NPS offers three different types of investment to subscribers. Each type offers the specific rate of returns on the investment. You have complete freedom to make the choice. You can select the investment option as per your choice at the time of registration. In case, you have no idea how to operate investment options. Then PFRDA will make the investment following the default distribution system. PFRDA invests your funds and appoints professional fund managers to manage your investment. NPS offers following three investment options:

  • E-Class (Equity funds)
  • C-Class (Debt funds)
  • G-Class (Government securities)

We recommend you to choose the auto option. Trust me; PFRDA has a better plan for you. In auto option, the distribution of funds depends on upon your age. For instance, before the age of 35 years, 50% of funds will be invested in E class and rest in C & G class. Every year, 2% of E-Class funds and 1% of C Class funds will be transferred to G-Class. By the age of 55 years, your corpus will have 10% in E Class, 10% in Class and 80% in G-Class.

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Under NPS, you can open two types of Accounts; Tier I and Tier II. Tier I is the basic and mandatory account. It does not allow premature withdrawal. But if you open Tier II based on Tier I account, you can make the premature withdrawal. Always remember, to open a Tier II account, you must have a Tier I account.

Required Documents For NPS

You need following documents to make investment in NPS:

  • Proof Of Address (Passport, Bank Passbook, Ration Card and Aadhar Card, etc.)
  • Proof Of Identity (PAN Card, Passport, Aadhar Card, Utility Bills or Ration Card, etc.)

Minimum Contribution Amount

You have to make a minimum contribution of Rs. 6000 annually. While one-time minimum contribution amount is Rs. 500. This applies to Tier I account only.
In a case of Tier II account, the minimum contribution amount is Rs. 2000 per annum. While one-time contribution is Rs. 250.

Finally, we have discussed key facts about investment in NPS. The opening of NPS account is no longer a pain. The best part, you can open it online. In case you want details about the registration process, please visit All About National Pension Scheme.
If you have any further query, please share with us!

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