National Pension Scheme (NPS) is a voluntary and defined contribution pension scheme. NPS is regulated by Pension Fund Regulatory and Development Authority. The Government of India introduced the retirement-oriented National Pension System (NPS) for the common public in May 2009. NPS is a long-term investment scheme in which investors will have to invest in every year till they reach the age of 70.

In NPS, individual savings are pooled into a pension fund. The pension fund is then invested in a diversified portfolio of assets like government bonds, corporate debentures, and shares. The investments made under the scheme are market-linked, which means that money invested is allocated to market-linked funds. Evidently, these funds are used for inflation-adjusted growth of the principal amount. The returns of these investments contribute to the development of the NPS account over time.

Investors of the NPS scheme can contribute regularly to the scheme. While having the flexibility of exiting the scheme prior to retirement. Upon maturity of the scheme, Depositors can withdraw a corpus as a lump-sum benefit.

PFRDA has designated the post office to act as a Point of Presence (POP). The POP is a designated place from where depositors can invest in the National Pension Scheme. Accordingly, all the post offices in India serve as a POP service provider that assists people to invest in NPS scheme.

Types of National Pension Scheme Accounts

1. Tier 1 account is the default account option to subscribers
2. Tier 2 account is the optional account option to subscribers

The NPS is a market-linked scheme, and there is no guaranteed national pension scheme interest rate.

NPS Eligibility Requirements:

To open an account under the National Pension Scheme, the post office has specified an eligibility requirement. These requirements are as follows –

1. Subscribers age will be between 18 and 65 years
2. The individual should be an Indian citizen
3. You should not qualify for NPS under any other sector
4. One minimum contribution is important every financial year. The amount of such a contribution should be Rs.500 or above.

Features of the National Pension Scheme :

1. Portability:
   The NPS is a portable pension scheme. This implies that the scheme will continue if the depositor changes jobs.
2. Choice of Investment Option:
   NPS offers a variety of investment options to subscribers like equity, corporate bonds, and government securities. Depositors can receive preferred options.
3. Fund Management:
   NPS has a fund management system where pension fund managers manage the investment of subscribers’ contributions.
4. Systematic Investment Plan:
   NPS allows for systematic investment through monthly contributions. This feature can help subscribers build a large corpus over time.
5. Nomination Facility:
   Subscribers under NPS can nominate a beneficiary. Additionally, senior citizens should choose this investment option owing to its low costs.

Benefits of National Pension Scheme

1. Tax Benefits:
   Contributions to NPS are eligible for tax benefits under Section 80C of the Income Tax Act and additional deductions under Section 80CCD (1B).
2. Pension Benefits
   Upon retirement, subscribers can withdraw up to 60% of the corpus as a lump sum. Additionally, they can use the remaining 40% to buy an annuity, therefore this provides a regular pension income.
3. Market-Linked Returns
   NPS invests in a mix of equities, bonds, and government securities, which provides market-linked returns to subscribers.
4. Annuity Options
   Subscribers have the option to choose from a range of annuity plans and providers, which provides flexibility in terms of pension income.

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