Scheme operational only through designated organisations

The New Pension System (NPS) can now be accessed in Kerala through identified post offices. The scheme was introduced by the Union government initially for its new recruits except Defence forces from January 1, 2004, and was subsequently extended to all citizens of India from age 18 to 55 years from May 1, 2009.

The scheme is operational through organisations that are designated as Points of Presence (POP). The Pension Fund Regulatory and Development Authority (PFRDA) has appointed the Department of Posts as one of the POPs to operate the scheme through identified post offices (POP-SP).

NPS offers Indian citizens a low-cost option for planning their retirement. There are two types of accounts under NPS — Tier-I and Tier-II accounts. The Tier-I is a non-withdrawal account where the minimum contribution will be Rs.500 per month or Rs.6000/- paid annually in each account.

There has to be a minimum of 4 contributions in a year, the customer has the choice of deciding on the frequency of contributions across the year according to their convenience. The Tier-II account is a voluntary savings account with a minimum monthly contribution of Rs.1,000/-. The Tier-II account holders are permitted to withdraw their savings whenever they wish. Any citizen of India, excluding NRIs between the ages of 18 and 55 years, can join the NPS and contribute for up to 60 years.

The contribution of the subscribers will be invested through six Pension Funds appointed by the PFRDA. Investments can be made in predominantly equity market instruments, in fixed income instruments other than government securities as well as in government Securities.

The level of investments is subject to the guidelines prescribed by the PFRDA.

The customer has the option to actively participate in making the investment options in these 3 categories, subject to the guidelines of PFRDA, or adopt the easy option for ‘Auto Choice' in case of lack of familiarity with making such investment options. In both scenarios, the investor has to mandatorily choose one of the 6 Pension Fund Managers identified by the PFRDA to manage the funds.

A subscriber can withdraw the funds at any time before 60 years, on attaining normal retirement age of 60 years or even after 60 years of age up to the age of 70. A portion of the accumulated savings, as prescribed by the Insurance Regulatory and Development Authority (IRDA), will have to be used to purchase a life annuity from any IRDA-regulated life insurance company. The balance amount can be drawn in a lump sum. For those above 60 years, a minimum of 10% of the pension wealth should be withdrawn every year and the investor has to fully exit the NPS at the age of 70.

Unique number

Every subscriber will be given a Unique Permanent Retirement Account Number (PRAN) Card and a Telephone Password (TPIN) as well as an Internet Password (IPIN). This Pension account can be operated from anywhere in the country as the PRAN will be the primary means of identifying and operating the account.

The Department of Posts launched this scheme through its post offices last month by covering all head post offices of the Western Region (Coimbatore) of Tamil Nadu and South Karnataka Region of Karnataka.