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India’s National Pension System is synonymous with retirement planning and investing. Earlier, NPS was open to only central government employees, but in 2009, it was opened to all citizens of India including private sector employees.
Run by the Pension Fund Regulatory and Development Authority (PFRDA), under the jurisdiction of the Ministry of Finance, NPS enables Indian citizens to contribute towards their pension fund, to be withdrawn when their account matures or under other specific circumstances.
Accounts in NPS
To learn more about how NPS works, read this blog.
The National Pension Scheme provides its subscribers with two types of accounts primarily referred to as Tier I account and Tier II account. It is mandatory for subscribers to join NPS through a Tier I account, whereas opening a Tier II account is optional and can be done at any time, whether it be at the time of opening the Tier I account or later.
The Tier-I/Pension Account is a permanent retirement account that requires subscribers to invest for the long term, and in return, they receive a pension at the time of retirement. Meanwhile, the Tier-II or Investment Account is a voluntary short-term investment account.
Tier I vs Tier II
Below are some key differences between Tier I and Tier II NPS accounts:
| Tier I | Tier II | |
| Status | Mandatory | Voluntary |
| Withdrawals | Restricted | Permitted |
| Min Initial Contribution | ₹ 500 | ₹ 1000 |
| Min Subsequent Contribution | ₹ 500 | ₹ 250 |
| Max NPS Contribution | No Limit | No Limit |
Registering for NPS and opening an account will enable you to open a Tier I, since that is the default choice for new investors. Why? Because you need to have a Tier I account in order to open a Tier II account.
How to open a Tier II account?
Once you have registered for a Tier I account, here is how you can go about opening a Tier II account:
- You should have a ‘Permanent Account Number’ (PAN).
- You can then enter details like PRAN, Date of Birth and PAN.
- OTP for the purpose of authentication will be sent to the mobile number registered with the CRA.
- You then need to fill up all the mandatory details (Bank, Nomination, Scheme Preference etc.) online.
- Upload copy of PAN Card and cancelled cheque.
- You need to enter the initial amount for investment (minimum ₹ 1000).
- You will then be routed to a payment gateway for making the payment towards your NPS account from Debit/ Credit card or Internet Banking.
- You will need to take a printout of the form after activation of Tier II account.
- The form along with copy of PAN card and cancelled cheque should be sent within 30 days from the date of activation of Tier II account to KFintech branch office or else the PRAN (Tier II) will be ‘frozen’ temporarily.
Conclusion
To learn more about you can plan your retirement with NPS and open an account, visit our dedicated NPS platform.
