Everything You Need to Know About Tier 1 and 2 NPS Accounts
Table of Contents
The organization's full name is National Pension Systems. It is a contribution-based pension scheme sponsored by the Indian government that offers an old-age retirement fund to anybody who wishes to participate. The PFRDA regulates and supervises the industrial sector (Pension Fund Regulatory and Development Authority). It was initially restricted to government employees, but in 2009, it was broadened to include non-government residents. In addition to being a market-linked product, NPS gives incentives based on the success of the fund. The scheme's primary goal is to provide all Indian residents with an appealing long-term savings option that provides secure and appropriate market-based returns for retirement planning. Any Indian citizen between the ages of 18 and 65 can establish an account. Learn more about NPS Accounts by clicking here.
NPS Account Types
The many types of NPS accounts from which to pick are as follows:
1. Tier 1 account
A Tier 1 account is a permanent retirement account that cannot be withdrawn. It had a lock-in term that lasted until the participant turned 60 before the end of 2011. The PFRDA, the governing body, did, however, implement a few adjustments in 2011. According to their revised rules, suitable staff would be eligible for early retirement after 15 years of service. Premature withdrawals are known as repayable advances, and they are uncommon.
After 25 years of service, a person may additionally withdraw up to 50% of their contribution.
Individuals will be able to use these withdrawals in a variety of situations that necessitate quick financial assistance, such as an acute sickness.
2. Tier 2 account
Individuals with an NPS Tier 2 Account can withdraw an unlimited amount of money. It works in the same manner that a savings account does. The primary distinction is that withdrawals from this account are more difficult than withdrawals from a savings account. It should also be noted that you can only open an NPS Tier 2 account if you already have a Tier 1 account. An NPS Tier 1 account requires a monthly payment of Rs 500 and an annual commitment of Rs 6000. A Tier 2 account, on the other hand, requires a Rs 1000 minimum contribution as well as a Rs 250 transaction fee.
How to Create An NPS Account?
If you have a bank account with one of the 17 NSDL (National Securities Depository Ltd)-registered institutions, you can open an NPS account online.
If a person's PAN is associated with a savings account, they can establish an NPS account on the official eNPS website.
The rest of the KYC and application processing will be handled by the bank.
If you have an Aadhaar card, you can open an e-NPS account. On February 17, 2016, the PFRDA (Pension Fund Regulatory Authority) certified Aadhaar as an e-KYC.
It must, however, be associated with a person's phone number and bank account number.
Take Away
Individuals are also prohibited from readily transferring funds between NPS accounts. The investment cannot be withdrawn for at least one year. As a consequence, picking the right pension fund is crucial. During the verification process, an individual will always get an OTP on their registered phone number.
