Tier-2 account makes NPS dynamic

To make the New Pension System (NPS) dynamic, Pension Fund Regulatory and Development Authority (PFRDA) has introduced the concept of Tier-2 account. This is to provide for withdrawals to meet financial contingencies.

According PFRDA consultant Kavim V. Bhatnagar, opening the Tier-1 account is compulsory for everyone opting for NPS. However, the Tier-2 account is optional for the investors, as it is a voluntary savings account from which the investor can withdraw money, any time and any number of times.

Flexibility

The Tier-2 enables people build savings through investments over and above those in the Tier 1 pension account. Only those having an active Tier 1 account can open the Tier 2 account. They can be opened simultaneously as well, according to Mr. Bhatnagar.

The Central Record-keeping Agency (CRA) will not levy additional maintenance charges on the Tier 2 accounts, other than the nominal Rs. 10 for each transaction, as is the case with Tier 1 account. Investors can choose separate fund managers, separate pattern of investment and appoint separate set of nominees. They can transfer money from Tier 2 to Tier 1 account too.

Minimum amount for opening Tier 2 account is Rs. 1,000. Minimum remittance is Rs. 250 and minimum balance at the end of a financial year is Rs. 2,000. Minimum number of contributions in a year is four. The Tier 2 savings can be added to pension corpus at the time of retirement to increase monthly pension.