How to Invest in The National Pension Scheme(NPS)?

How to Invest in The National Pension Scheme
Written by Medhaavi Mishra

National Pension Scheme or NPS is a standardized scheme that was established by the Government of India. The regulatory measures of this scheme are catered by the Pension Fund Regulatory and Development Authority (PFRDA). This scheme is acknowledges as a retirement saving scheme which is beneficial both for the employers and the employees to imbibe sustainable measures for building optimal wealth which can be payable to the employees during their retirement. Therefore, the concept of this scheme reflects the importance of systematic savings among the state and central employees. NPS became active on January 1st, 2004 and runs with a mission to reform the importance of pension, as it is the cheapest market linked pension scheme of India.

How to Invest in The National Pension Scheme

Who Stands Eligible to Invest in NPS (National Pension Scheme)?

Before you think about investing on NPS it is vital to understand its eligibility. As per the rules stipulated by the Government of India all citizens and employees who work under the central/state sector of the government and fall between the age group of 18 to 60 years stand eligible for investing on the scheme. For those who have a pre-existing pension accounts, they must apply for a fresh or new account by registering with this scheme.

How Does National Pension Scheme?

Under the guidelines set by Government of India for NPS, any individual who satisfies the eligibility criterion holds the right to invest on any type of pension funds. There are three different forms of funds that are part of this scheme wherein employers who desire of getting great interests should invest. In case, if you are unsure or do not mention about the type of fund on which you want to invest then by default your investments are laid on the funds of PERDA. These types of funds get invested by the Pension Fund Regulatory and Development Authority and are thus managed with the help of experienced fund managers.

Any individual who is the National Pension Scheme holder has the opportunity to switch between their desired funds. However, once you register with any sort of funds then it is important to continue it for a minimum period of  1 year, before switching to any other type of funds. Thus, with this the contribution that is made by the scheme holder would grow and with time they would start receiving maximum returns on the investments that they have made.

In addition to that any employee who requires a Permanent Retirement Account Number (PRAN) can apply for this scheme and submit the registration form and the supported documents for general verification. With this scheme, the employees are granted two types of accounts which are Tier 1 and Tier 2. The Tier 1 is regarded as the primary account which the scheme holder should open for having a Tier 2 account. Important thing that should be noted here is that the Tier 1 account does not support any form of premature withdrawals until the individual reaches 60 years of age, however with Tier 2 account the scheme holder can withdraw funds anytime they want.

Documents Essential For National Pension Scheme

How to Invest in The National Pension Scheme

There are two important types of documents that should be submitted by the investors for enrolling into the NPS and they are

  • Identity proof in the form of any one of the following documents

-Aadhar Card

– PAN Card

– Ration Card along with photograph

– Job Card by NAREGA

– Photo Identity Card

  • Residence proof in the form of any one of the following documents

– Passport

-Bank Passbook

-Electricity Bill

-Water Bill

What Are The Benefits of Investing on National Pension Scheme?

Besides being one of the most trusted schemes authorized by the Government of India, there are many more benefits associated with the investment of National Pension Scheme and they are

  • The scheme offers endless flexibilities that ensures investors rely on the best investment options
  • The NPS account by the scheme holder can be used from any part of India
  • Every agenda, process and claims of the scheme is supported by transparent rules and regulations
  • It helps to an amazing extent for your retirement plans were the investor can be sure for getting desired returns during retirement.
  • It even provides tax benefits under section 80C of the Indian Income Tax Act, India.

About the author

Medhaavi Mishra