Having multiple-NPS accounts for a single individual is not allowed, according to the rules of the National Pension Scheme. But as the NPS scheme is completely portable across all sectors and locations, it absolves you of the necessity of maintaining more than one accounts. Before knowing more about the scheme, you must understand the basic features of this scheme.
What is the NPS ?
Implemented on May 1, 2009,the National Pension Scheme (NPS) is a government-sponsored pension scheme. One of the key benefits of the NPS is that it acts as an investment and pension plan by providing income along with market-based returns. This social security initiative of the union government is open to employees from the public sector, private sector and unorganized sector. Personnel and officers of the armed forces, however, are not allowed to participate in the scheme. It encourages people from all the three sectors to invest in their pension account at regular intervals. After retirement, the subscriber can withdraw a certain amount from the corpus, and avail the remaining amount as monthly pensions.
The National Pension Scheme is based on unique Permanent Retirement Account Number (PRAN) which is allotted to every subscriber for NPS. The scheme is regulated and managed by the Pension Fund Regulatory and Development Authority (PFRDA).
Two crucial benefits of the NPS, include the scheme being portable across jobs and locations and providing tax benefits under Sections 80C and 80CCD(1)of the Income Tax Act. The PFRDA has made this scheme open to all Indian citizens between 18 and 60 years on a voluntary basis.
Points of Presence (POPs) are the first point of interaction of NPS subscribers with the NPS scheme. Authorised branches of any POP, called POP-subscribers (POP-SP) are the collection point for the subscribers, and they provide the subscribers with a range of customer services, including withdrawal requests from NPS. The locations of POPs can be accessed through the website of PFRDA.
What is portability in the NPS ?
Portability across all jobs and locations is a key benefit of the NPS, which absolves you from the necessity of maintaining multiple-accounts in the NPS. It means that you can operate the account from anywhere in India, irrespective of individual employment and location/geography. You can shift from one sector to the other, like from private to government, or vice-versa within the same account. Likewise if you shift from private or public employment to become self-employed, you can continue the individual contributions in the same account. If you again enter employment, the contribution continues in a similar manner within the same account.
Portability allows allows the subscriber to from one POP to another POP, and from one POPs to another POPs. Thus, there is no need to maintain more than one accounts in the NPS.
How does the NPS work?
Upon joining, you are allotted a Permanent Retirement Account Number (PRAN). All your contributions towards the National Pension Scheme is made directly through the employer that you work for. At retirement or during exit from the scheme, this corpus of funds is made available to you. But it isn’t made available in its entirety. You are required to redirect some amount from this corpus to be invested in an annuity scheme. This portion will then serve as a monthly pension which is provided to you, post-retirement.
Under the scheme, two sub-accounts Tier-I and Tier-II are provided. Tier-I account is mandatory, besides being a non-withdraw able retirement account. You can withdraw the amount only after meeting the prescribed exit conditions under the NPS. On the other hand, Tier-II is a voluntary savings facility available as an add-on to the Tier-I account. You are free to withdraw your savings from this account.
Choice of investments in the NPS: NPS offers a range of investment options and choice of Pension Fund Manager (PFMs). If you are an active investor, you can plan the growth of your investment in alignment with your goals. You can also switch from one investment option to another, as your returns are completely market-related.
Minimum contribution in NPS: You have to contribute a minimum annual contribution of Rs 6000 for your Tier I account in a financial year, and if you fail to contribute the requisite amount, the account will be frozen. In order to unfreeze the account, you have to pay the total of minimum contributions for the period of freeze, along with the minimum contribution for the year in which the account is reactivated, and a penalty of Rs.100.
Though you can not have multiple-NPS accounts as an individual in the scheme, the National Pension Scheme has an in-built feature of portability across jobs and locations, which allows complete flexibility if you change your occupation and place of residence.
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