New pension Scheme has the following broad objectives:

  • Provide old age income
  • Reasonable market based returns over the long term
  • Extending old age security coverage to all citizens

Permanent Retirement Account Number (PRAN). It will always be permanent.

  • PRAN will provide access to two personal accounts
    • Tier-I pension account: You will contribute your savings for retirement into this non withdrawal account.
    • Tier-II savings account: This is an ad-on account, which is simply a voluntary savings facility. You are free to withdraw your savings from this account whenever you wish.


  • Entry Age:  18-60 Years
  • Minimum amount per contribution – Rs. 500
  • Minimum contribution per year – Rs. 6,000
  • Minimum number of contributions – One per year
  • Active choice – Individual Funds {Equity (E), Corporate bonds (C) and Government Securities (G) Asset classes
  • Auto choice – Lifecycle Fund


NPS also allows you to choose from any one of the following six entities to manage your pension fund

  • ICICI Prudential Pension Funds Management Company Limited
  • IDFC Pension Fund Management Company Limited
  • Kotak Mahindra Pension Fund Limited
  • Reliance Capital Pension Fund Limited
  • SBI Pension Funds Private Limited
  • UTI Retirement Solutions Limited

In this option, the investments will be made in a life-cycle fund. Here, the percentage of funds invested across three asset classes will be determined by a pre-defined portfolio. At the lowest age of entry (18 years), the auto choice will entail investment of 50% of pension wealth in “E” Class, 30% in “C” Class and 20% in “G” Class. These ratios of investment will remain fixed for all contributions until the participant reaches the age of 36. From age 36 onwards, the weight in “E” and “C” asset class will decrease annually and the weight in “G” class will increase annually till it reaches 10% in “E”, 10% in “C” and 80% in “G” class at age 55.

  • No additional CRA charges for account opening and annual maintenance in respect of Tier II. A nominal charge will be taken separately for each transaction in Tier II.
  • Unlimited number of withdrawals, only criteria to maintain a minimum balance of Rs 2000 at the end of Financial Year i.e., as on March 31st.


Contributing to Tier II account

You have to make a minimum contribution of Rs. 250 and have to make minimum one contribution in a Financial Year. You can contribute to Tier II account till you have active Tier I account

Vesting Criteria Benefit
At any point in time before 60 years of Age You would be required to invest at least 80% of the pension wealth to purchase a life annuity from any IRDA – regulated life insurance company. Rest 20% of the pension wealth may be withdrawn as lump sum.
On attaining the Age of 60 years and up to 70 years of age At exit you would be required to invest minimum 40 percent of your accumulated savings (pension wealth) to purchase a life annuity from any IRDA-regulated life insurance company.

You may choose to purchase an annuity for an amount greater than 40 percent. The remaining pension wealth can either be withdrawn in a lump sum on attaining the age of 60 or in a phased manner, between age 60 and 70, at the option of the subscriber.

Death due to any cause In such an unfortunate event, option will be available to the nominee to receive 100% of the NPS pension wealth in lump sum. However, if the nominee wishes to continue with the NPS, he/she shall have to subscribe to NPS individually after following due KYC procedure.

This allows the investor to reap the benefits of compounding till he turns 60. The NPS also offers the flexibility to draw up to 60% of the retirement corpus as a lump sum to meet financial life goals like children’s marriages, housing, or draw down the lump sum in a staggered manner till one is 70 years old. The rest can be used to buy an annuity from any of the seven Irda-regulated annuity service providers. So, the NPS is probably the only wholesome, universal, technology driven retirement planning product in the country today.