The upper age limit for joining the National Pension System (NPS), which was 60 years earlier, has been raised to 65 years. “NPS is currently open for people between 18 and 60, and our Board has approved raising the age limit for joining to 65,” PFRDA Chairman Hemant Contractor said at a conference in Delhi, news agency IANS reported. The measure announced by PFRDA will allow more people to come under the pension cover as currently only 15-16 per cent of employees in India are covered by pension, the pension regulator’s chairman’s said.
Here are 5 things to know about NPS:
1) NPS is a defined contribution based pension scheme aimed at providing income in retirement years with market-based return over the long term. Under NPS, there are two types of accounts: Tier I and Tier II. While the Tier I account is non-withdrawable till the age of 60 except in specific situations, the Tier II account is voluntary and can be withdrawn anytime.
2) NPS account can be opened by Indian citizens above 18 years and less than 65 years of age, after the latest change. Non-resident Indians (NRIs) can also open an NPS account. However, the maturity tenure is not fixed in case of NPS; you can contribute to the NPS account till the age of 70.
3) The minimum contribution required for NPS is Rs 6,000 per year. But tax benefit will be available only on Rs. 1.5 lakh under Section 80CCD(1) of the Income Tax Act, and an additional Rs. 50,000 will be available under Section 80CCD(2) – a total tax benefit of up to Rs. 2 lakh.
4) Premature withdrawal is also allowed in NPS in specific circumstances. After 10 years, subscribers become eligible for early, partial withdrawal under specific circumstance like children’s higher education or marriage, construction or purchase of house and treatment of critical illness (for self, spouse, children or dependent parents). But if you want to exit before retirement, you must use at least 80 per cent of the accumulated corpus to buy an annuity from a life insurance company including LIC.
5) In NPS you have the discretion in deciding where to invest your money. You can choose from a mix of three funds – equity funds, government securities fund and fixed income instruments other than government securities. A subscriber is allowed to invest up to 75 per cent in the equity funds.