What is NPS?
NPS or the National Pension System is a retirement saving scheme launched by the Government of India on 01 January 2004. For the first 5 years, only central and state governments employees were permitted to open NPS accounts.
From 2009, any Indian citizen can open an NPS account and use it to save for old age. Around 70 lakh young government employees and over 65 lakh other people across India are already using the NPS to regularly save for their retirement.
Why should one open an NPS account?
Most of us can expect to live till at least age 80. Which means that we should have enough savings set aside to take care of our expenses for at least 20 years after we stop working.
NPS is a simple, easy, secure and low-cost way to regularly save a small part of our income for old age. If we save enough while we’re still young, we won’t need to depend on our children or anyone else when we are old.
Who is responsible for supervising the NPS?
NPS is regulated by the Pension Fund Regulatory and Development Authority or PFRDA. PFRDA helps keep retirement savings of citizens safe and protects subscribers from fraud or malpractice.
The NPS Trust takes care of the savings under the NPS in the best interest of subscribers.
Can I enrol more than one Giftee using this website?
Yes. Gift a Pension allows you to add more than one Giftee.
Who can open an NPS account?
Any Indian citizen aged between 18 and 65 can voluntarily open an NPS account.
How much does one need to save in NPS?
A person needs to save at least ₹1,000 per year in NPS. The minimum amount per contribution has to be ₹500 or more.
However, we can, and should, save as much as we can afford so that we have enough savings set aside for a secure and dignified old age. Please see the pension calculator on this website to see how much one can accumulate by age 60 - depending on the amount, age of the person and the expected returns delivered by NPS.
Should one continue to save the same amount in NPS over time?
As our incomes usually grow over the years, in line with inflation, we should gradually increase the amount of money that we put into our NPS account. This makes sure that the actual value of savings we’re putting into our NPS accounts does not come down over time due to inflation.
Is there any penalty if a person is unable to save for a few months?
NPS is a flexible scheme. A person can save as per his or her own income and convenience – on a monthly, quarterly, half yearly or annual basis. There are no penalties or charges if one misses a contribution. Savings in the NPS account will remain invested and will continue to grow.
How do NPS savings grow?
NPS savings are managed and invested by as per PFRDA regulations in a mix of government bonds, corporate bonds and shares of large, listed companies. As the value of these investments go up, the value of NPS savings also grows over the years.
Please see the a href="#toolkits">pension calculator on this website to see how much even a 1% additional return can increase the savings achieved by age 60.
Would I have any say in where my savings are invested?
Yes. You can choose between 4 “funds” or “schemes” under NPS. This determines where savings are invested. You can choose between any of these funds:
- Corporate Bond
- Government Securities
You’re allowed to shift your NPS savings from one scheme or fund to another twice a year, if you wish.
Savings through “Gift-a-Pension” are automatically put into the conservative or lowest risk “Auto-Choice” scheme.
Who manages savings in NPS?
NPS savings are managed by highly respected expert pension fund managers appointed by PRFDA. These are dedicated pension funds set up by HDFC, ICICI, UTI, SBI, Kotak Mahindra, LIC, Reliance and Aditya Birla Group. A person can select any of them to manage their NPS savings.
You can select any of these pension funds to manage your NPS savings. A person is allowed to shift her NPS savings to another fund manager, twice a year. Savings under Gift-a-Pension are managed by HDFC Pension Management.
Are returns under NPS guaranteed or fixed?
No. The rate at which savings in NPS grow is not fixed or guaranteed. The returns and the value of NPS savings may go up or down over time depending on the value of the investments.
Who is the fund manager for Gift-a-Pension?
NPS savings under Gift-a-Pension are managed by HDFC Pension Management – India’s largest private sector pension fund. HDFC already manages over ₹10,000 crore of retirement savings. It has delivered returns of over 11% per year on average over the last 7 years.
In which NPS scheme are savings under Gift-a-Pension invested?
Savings under the Gift-a-Pension initiative are automatically invested in the NPS “Auto-Choice” scheme – LC-25. This is a conservative, lifecycle scheme. In this Scheme, savings are automatically shifted from higher risk equity investments to lower risk bonds as a person grows older. Therefore, this scheme protects savings from excessive volatility risk (or ups and downs) in investments.
When can a person start getting a pension from NPS?
Pension benefits in NPS begin at 60. When a person is aged 60 years, 60% of the full savings in the NPS account can be withdrawn as a lump sum. The remaining 40% of the savings in the NPS account are converted into a monthly pension.
How much pension does a person get with NPS?
The value of the pension in NPS depends on: (a) the amount a person saves regularly over the years, (b) the age at which a person starts saving, and (c) the returns that these savings earn. A person should open an NPS account at the youngest possible age. And save regularly.
Please see the pension calculator on this website to see the difference in pension savings by age 60 for a person who starts saving at (say) age 20 Vs. 25 Vs. 30. This will show how even modest regular savings can add up to a large amount through the magic of compounding.
Can a person withdraw from NPS before age 60?
Yes, a person can withdraw up to 25% of the contributions made into the NPS account 3 times before age 60. The first withdrawal can be taken three years from opening an NPS account. The 2nd and 3rd withdrawals have to be 5 years after the previous withdrawal.
For what purposes are withdrawals from NPS permitted?
Pre-retirement withdrawals from NPS are permitted for (a) children’s higher education, (b) children’s marriage expenses, (c) purchase or construction of a home, (d) expenses for critical illness for self, spouse, children or dependent parents, (e) medical or incidental expenses due to disability or incapacitation, (f) cost of skills development or re-skilling, and (g) for setting up own business.
Can a person close their NPS account before age 60?
Yes. An NPS account can be closed after 10 years. At that point, if the total money in the NPS account is less than ₹1 lac, the full amount can withdraw as a lump sum.
If the total savings in the NPS account are more than ₹1 lac, only 20% of the money can be withdrawn as a lump sum. The remaining savings will be paid back as a monthly pension.
How does one get the withdrawal or monthly pension?
All withdrawals and pension benefits from NPS are transferred directly into the bank account of the subscriber.
What happens if an NPS subscriber dies before retirement?
In this unfortunate situation, the person’s nominee will be paid the full amount in the subscriber’s NPS account – all savings and returns earned till that date. This money will be directly transferred into the nominee’s bank account.
Who is a nominee?
A nominee is usually the spouse or children or legal heir of the person who has the NPS account. NPS subscribers have to provide their nominee’s details in the NPS Application Form. This is both important and compulsory.
What happens to the NPS account the person moves to another city?
The NPS account continues to remain in the name of the person. He or she can continue to put money in the same account regardless of where the person lives or works over time. Information and services can be accessed either through WhatsApp or by simply calling the national Helpline at 080 2300 2000 on any working day from 8:30 am to 6:30 pm.
What services does the Helpline provide?
Our helpline number is 080 2300 2000. The helpline works on weekdays from 8:30 pm to 6:30cpm. The Helpline is available for any questions such as NPS account balance, statement of recent transactions, etc. The Helpline also provides information and help on withdrawal application, filing of an insurance claim or filing and resolution of complaints.