NPS – Should you invest in national pension scheme?- Part II
How to enrol and operate?
Several public sector banks, a few private sector banks like Axis and ICICI, and a few other intermediaries like HDFC Securities are empanelled distributors for NPS.
The enrolment process has largely been offline so far, consisting of filling a form, submitting proofs of identity & address, and a photograph. This gets you a Permanent Retirement Account Number (PRAN) in about 20 days. For some inexplicable reason, an enrolment (know-your-customer or KYC) done for trading accounts or banks or mutual funds is not automatically valid for NPS and has to be done again. NSDL has proposed an Aadhar-based online enrolment system, which works in paperless form if you have your mobile number linked to your Aadhar. This is yet to be fully operationalized.
After the initial paper enrolment, several intermediaries allow you to make your contributions through online transfer / ECS, and also view your account online.
What are the account and scheme options?
There are two types of account
- Tier-I is a non-withdrawable account. You can only withdraw after retirement.
- Tier-II is a voluntary savings facility. You are free to withdraw your savings from this account whenever you wish. You cannot open a Tier-II account without opening a Tier-I first
Key features:
| Particulars | Tier I | Tier II |
| Minimum contribution required at the time of Account opening | Rs. 500 | Rs. 1,000 |
| Minimum individual contribution | Rs. 500 | Rs. 250 |
| Minimum amount balance at the end of financial year | Rs. 6,000 | Rs. 250 |
| Transaction charges | 0.25% of contribution | 0.25% of contribution |
| Minimum number of contribution required in a year | 1 | 1 |
In terms of schemes, there are 3 to choose from – E (equity) being the more risky but potentially more rewarding, G (government securities) being the safest but lowest yielding; and C (fixed income other than government securities) being an intermediate option. You can opt for active choice, wherein you can put between 0-50% in E, and the rest in C or G. You can also let the pension fund manager decide it for you, based on your age – ‘auto choice’.
You can choose to have your account managed by one of 7 pension fund managers.
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