What is National Pension System (NPS) ?


  • The National Pension System (NPS) is a defined-contribution pension system operated by the Government of India.
  • The scheme allows individuals to make decisions about where their pension fund is invested, permits limited withdrawal prior to retirement and reduces the total pension liabilities of the Government of India.
  • The scheme is structured in two tiers. A tier-1 account is a basic retirement pension account available to all citizens from 1 May 2009.
  • NPS is open to all citizens of India between the ages of 18 and 60 on a voluntary basis.
  • It is mandatory for central government employees appointed on or after 1 January 2004, except for members of the armed forces, to have a tier-1 NPS pension.
  • The employee contribution is fixed at 10% per month which is matched by an employer contribution of the same amount.
  • PFRDA has set the following guidelines with regard to subscriber contribution:
  • Minimum amount per contribution: Rs. 500
  • Minimum number of contributions: 1 per year
  • Minimum annual contribution: Rs 6,000 in each subscriber account.
  • Maximum annual contribution: Rs 12,000 in each subscriber account.
  • The scheme permits subscribers to benefit, as applicable, under the Income Tax Act (1961).


  • Recently,Reserve Bank has allowed non-resident Indians (NRIs) to subscribe to the National Pension System (NPS).
  • The objective is to enable Indians living abroad to access old age income security.
  • According to RBI, it has now been decided, in consultation with the Government, to enable National Pension System (NPS) as an investment option for NRIs under FEMA, 1999.
  • NRIs may subscribe to the NPS governed and administered by the Pension Fund Regulatory and Development Authority (PFRDA), provided such subscriptions are made through normal banking channels and the person is eligible to invest as per the provisions of the PFRDA Act.
  • The subscription amounts shall be paid by the NRIs either by inward remittance through normal banking channels or out of funds held in their NRE/FCNR/NRO account.
  • There will be no restriction on repatriation of the annuity/ accumulated savings.
  • NPS was launched on January, 1, 2004 with the objective of providing retirement income to all the citizens.
  • NPS aims to institute pension reforms and to inculcate the habit of saving for retirement amongst the citizens.
  • Initially, NPS was introduced for the new Government recruits (except armed forces).
  • With effect from May 1, 2009, NPS has been provided for all citizens of the country, including the unorganised sector workers, on voluntary basis.