The National Pension System (NPS) is a defined-contribution pension system in India regulated by the Pension Fund Regulatory and Development Authority (PFRDA) which is under the jurisdiction of the Ministry of Finance of the Government of India.
NPS is a market-linked annuity product. On retirement or exit from the scheme, the Corpus is made available to the Subscriber with the mandate that some portion 60 percent of the Corpus must be invested into Annuity to provide a monthly pension post-retirement or exit from the scheme.
The New Pension Scheme was implemented with the decision of the Union Government to replace the Old Pension Scheme which had defined-benefit pensions for all its employees. It is mandated for new recruits (except armed forces) joining government services from 1 January 2004.
While the scheme was initially designed for government employees only, it was opened up for all citizens of India between the age of 18 and 65 (later extended to 70 years) in 2009, for OCI card holders and PIO's in October 2019.
Any individual who is a subscriber of NPS can claim tax benefit for Tier-I account under Sec 80 CCD (1) within the overall ceiling of ₹1.5 lakhs under Sec 80 C of Income Tax Act. 1961. An additional deduction for investment up to ₹50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B).
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| Source: ET Money |
There are 11 NPS fund managers as of January 2025:
- Aditya Birla Sun Life Pension Management
- Axis Pension Fund Management
- DSP Pension Fund Managers
- HDFC Pension Management
- ICICI Prudential Pension Fund Management
- Kotak Mahindra Pension Fund
- LIC Pension Fund
- Max Life Pension Fund Management
- SBI Pension Funds
- Tata Pension Management
- UTI Retirement Solutions
Each of them offers 4 types of schemes:
- Scheme E (Equity)
- Scheme C (Corporate bonds)
- Scheme G (Government bonds)
- Scheme A (Alternative investments funds)
You can switch fund managers once a year.
As of mid 2024, MFs commanded over ₹55 trillion in assets and traditional NPS tier-I funds had assets worth Rs1.75 trillion. NPS tier-II funds had ₹5,435 crore under its hood.
Also see: NPS Tier II vs Mutual Funds