How the National Pension System works to see you through your sunset years

Business Standard: Increasing life expectancy makes for a great economic metric, but can throw up a major challenge for the individual or household. Let's face it, your employability tapers off as you age, and there will likely come a time when no company will engage you, no matter how willing or able-bodied you are. At the same time, you're going to have to start dealing with mounting medical bills and a higher cost of living, driven by inflation.

Alright, so you know all that and have already invested in stocks and mutual funds, made contributions to your provident fund, made some fixed deposits, bought yourself a health policy. What other options do you have take care of your post-60 years?

One such is the National Pension System (NPS), a long-term investment scheme for retirement planning. Regulated by Pension Fund Regulatory and Development Authority (PFRDA), it was rolled out by the government in 2004 to offer citizens an affordable social security plan.

Under NPS, both employees and employers contribute to the scheme, and the greater the contribution, the greater the corpus. NPS withdrawal is allowed only after three years of subscription.

On opening an NPS account, a unique 12-digit unique Permanent Retirement Account Number (PRAN) is allotted to you. Two types of account can be accessed through PRAN -- Tier-I and Tier-II. The first is a non-withdrawable account and the second is a voluntary savings plan from which you can withdraw money whenever you want.

NPS charges

A sum of Rs 125 for subscriber registration and a transaction charge of 0.25 per cent of the initial contribution, subject to a minimum of Rs 20 and capped at Rs 25,000, are charged to the subscriber. BS

NPS eligibility

All citizens, including NRIs, between 18-65 years of age can open an NPS account, which is independent of subscriptions made to any other pension plan. Read Complete Article