The Central Government launched the National Pension Scheme (NPS) as a social security programme. With the exception of individuals in the military services, employees of the public, private and even unorganised sectors are eligible for this pension system.
The programme reassures participants to make regular contributions to a pension account during their employment. In this scheme, a portion of the corpus may be removed by subscribers upon retirement and you get the remaining amount as a monthly pension as an NPS account holder, once you retire.
Formerly, only Central Government employees were eligible for the NPS investment plan. But now, the PFRDA is available to all Indian working citizens, on a voluntary basis.
So, read on to understand how to invest in NPS?
H2: How to invest in the NPS?
In addition to providing an online and offline option for opening an account, the Pension Fund Regulatory and Development Authority (PFRDA) oversees the work of the NPS. Here’s the detailed guide on how to invest in National Pension Scheme –
How to invest in NPS online?
Before proceeding,keep the following documents with you before opening an online account:
- Aadhaar card
- Net-banking details
- PAN card
- Passport size photographs
- Scanned image of your signature
After these documents are ready, follow the steps below –
Step 1: Go to the NPS’s official website and select “Individual” after clicking on the “Registration” option.
Step 2: Enter your PAN and Aadhaar card numbers, and a one-time password (OTP) will be sent to your registered phone number.
Step 3: After entering the OTP, select “Continue.” You will receive an acknowledgement number with your name. Up next, click on the option “OK.”
Step 4: Enter your personal information in the next step and click on “Save and Proceed.” You must then select between the Auto and Active asset allocation options. After that, complete the nominee information.
Step 5: Once the nomination information has been completed, attach your specimen signature and an online copy of the cancelled bank account cheque.
Step 6: The last step is to pay a minimum of ₹ 500. Your PRAN number and the payment receipt will be sent to you when the net banking payment has been completed.
How to invest in NPS offline?
Follow these steps in order to complete the procedure for investing in NPS offline.
Step 1: Visit any Point of Presence (POP) designated by the PFRDA to create an offline NPS account. The majority of banks are registered as POP, which is where you can complete the registration. Present the photocopies of the original know-your-customer (KYC) documentation to the closest POP location.
Step 2: You will be given an application to open an account, which you need to complete with a black ink pen.
Step 3: You will be given a 17-digit receipt number once you complete the application.
Step 4: Up next, you will get a kit at your registered address with your PRAN number after confirming your application.
Step 5: Finally, you will be informed about the PRAN number and the kit dispatch after you get a mail or SMS on the registered mobile phone regarding the same.
Now let’s move on to the section where we discuss the most common query, “Is NPS worth investing?”
Why should you invest in the NPS?
For those who have a low tolerance for risk and wish to start saving for retirement early, they must invest in National Pension Scheme. Undoubtedly, having a steady pension during your retirement years can be beneficial, particularly for those who serve in private sector employment.
A primary financial objective for many of us is to save for retirement, and there are several reasons why the National Pension System (NPS) is a good choice. It has a number of tax advantages, is professionally managed, and provides steady pension income through annuities in addition to strong profits in the future. So, let’s now discuss each of these aspects to answer the most common query, “Is NPS a good investment?”.
A stable post-retirement income is guaranteed by an annuity in NPS
In the NPS investment option, about 40% of the corpus is considered an annuity, with the remaining 60% being paid to you in one lump amount at maturity. With the aid of these annuities, you may ensure financial security during your retirement years by earning a regular stipend contingent on the success of your pension fund management.
Expert administration
The PFRDA (Pension Fund Regulatory and Development Authority) regulates and supervises every facet of the NPS. The PFRDA has approved providers of annuity services as well as fund managers to oversee the investments. Strict restrictions guarantee benefits and expert investment management.
Selection of investments
Now, two main choices are available for NPS investment — Active and Auto. If you choose the “Active” option, you will be able to choose how much government securities, corporate bonds, stock, and alternative investment funds to allocate to each asset class. Auto Choice automatically decides your NPS asset allocation based on your age between corporate bonds, government securities and equities.
Safeguards your family
Concerned about your family’s comfort and safety after your demise? NPS has an answer. It is possible to select a pension plan that will continue to provide monetary assistance for your spouse after your death. In this manner, your family’s financial requirements are covered, and their pension assistance is sustained for as long as they live.
What are the alternatives of NPS investments?
The Public Provident Fund (PPF) is the first fund that springs to mind when considering options for post-retirement savings. PPF is an excellent long-term investment option since it offers guaranteed returns for all age groups, over an extended period of time. An established government-funded investment programme, PPF has long been favoured by those with extended investing horizons. The programme must be invested in for 15 years in order to provide the finest outcomes!
Premature PPF account closure was not previously possible, but it is now possible, provided that the account holder maintains the account for a minimum of five years prior to closing it.
Things to keep in mind before making NPS investment
You may increase your retirement fund and avoid taxes by investing in the NPS. However, before embarking on your NPS journey, it’s imperative that you properly plan your investments. The following are some crucial considerations for NPS investments online –
Link your financial objective to NPS investments
Since the NPS is a long-term investment vehicle, you should be aware of your financial aspirations before making an investment in it.
Allocation of assets between debt and equity
The NPS is an investment instrument connected to the market that carries medium to high risk. Funds can be allocated by investors into both debt and equity classes. Additionally, the investor has the option to invest using the active mode or the auto mode at the moment of the transaction.
NPS offers two different accounts, Tier-I and Tier-II
Investors must create a Tier-I account in order to make required investments in NPS. Additionally, a Tier-II account can only be formed voluntarily and in addition to a Tier-I account. Restrictions on withdrawals, maturity and reinvestments at maturity apply to Tier-I accounts. Additionally, Tier-II accounts lack the extensive tax benefits of Tier-I accounts and do not have the same withdrawal limits.
Investing a single payment or in instalment methods
The PFRDA permitted the instalment option to invest in the NPS post-2020. The facility is known as the D-REMIT facility. This feature allows NPS users to move money straight from their bank account to their NPS account. Like mutual fund SIPs, they can utilise the D-REMIT function to automatically transfer a certain amount from their bank accounts into NPS on a regular basis.
Conclusion
The NPS investment is a defined contribution pension scheme for Indian job holders. Similar to EPF and PPF, the National Pension Scheme also extends extensive income tax benefits that ensure you get the best return. Having said that, it might be difficult to decide which investment best suits your needs when so many are available. Among these, the National Pension Scheme is frequently regarded as a well-liked and dependable investment choice for its various benefits, as discussed above.
Hopefully, now you have the clarity on how to invest in NPS? So, choose and plan your investment journey as per your requirements.
FAQ’s:-
At the time of registration, a subscriber must pay an initial contribution minimum of ₹500 for Tier I and a minimum of ₹1000 for Tier II.
There is no limit to maximum investment in NPS to your NPS Tier I account, although there is a minimum initial payment requirement of ₹500 and an annual contribution requirement of ₹1,000 p.a.
No, the subscriber is limited to one NPS account at a time. The PRAN, commonly known as the NPS Account number, may be valid for a single account, which is completely transferable across jobs and locations.
No, creating a Tier II NPS Account is at the subscriber’s discretion. After creating the Tier I account, the subscriber can create a Tier II NPS account later.