• Pension plans provide financial security and stability during old age when people don’t have a regular source of income.
• Retirement plan ensures that people live with pride and without compromising on their standard of living during advancing years.
• Pension scheme gives an opportunity to invest and accumulate savings and get lump sum amount as regular income ( every month) on retirement.
• The National Pension System (NPS) was launched on 1st January 2004 with the objective of providing retirement income to all the citizens.
• NPS has been provided for all citizens of the country including the unorganized sector (sectors not registered under government i.e. private sector) workers on a voluntary basis.
• Additionally, to encourage people from the unorganized sector to voluntarily save for their retirement the Central Government launched a co-contributory pension scheme, ‘Swavalamban scheme’, in the Union Budget of 2010-11. Under Swavalamban scheme, the government will contribute a sum of 1,000 to each eligible NPS subscriber who contributes a minimum of Rs.1,000 and maximum Rs.12,000 per annum. This scheme is presently applicable up to F.Y.2016-17.

NPS offers following important features to help subscriber save for retirement:

• The subscriber will be allotted a unique Permanent Retirement Account Number (PRAN).
• This unique account number will remain the same for the rest of subscriber’s life. This unique PRAN can be used from any location in India.
• There are two type of personal accounts in PRAN-

1. Tier I Account – This is non- withdrawal account means you can withdraw from this account only after retirement. There are tax benefits provided to this account holder.
2. Tier II Account -This is simply a voluntary savings facility. The subscriber is free to withdraw savings from this account whenever the subscriber wishes. No tax benefit is available on this account.

1. Central government employee – NPS is applicable to all new employees of Central Government service (except Armed Forces) and Central Autonomous Bodies joining Government service on or after 1st January 2004. Any other government employee who is not mandatorily covered under NPS can also subscribe to NPS under “All Citizen Model” through a Point of Presence – Service Provider (POP-SP).
2. State government employee – NPS is applicable to all new employees of State government services and State Autonomous Bodies joining Government service on or after 1st January 2004. Any other government employee who is not mandatorily covered under NPS can also subscribe to NPS under “All Citizen Model” through a Point of Presence – Service Provider (POP-SP).
3. Corporate – A corporate can choose to invest in NPS either at subscriber level or at corporate level centrally for all its subscribers (employees).
4. Individual – All citizens of India between the age of 18 and 60 years as on the date of submission of his / her application to Point of Presence (POP) can join NPS.
5. Unorganised sector worker – A citizen of India between the age of 18 and 60 years as on the date of submission of his / her application, who belongs to the unorganized sector or is not in a regular employment of the Central or a state government, or an autonomous body/ public sector undertaking of the Central or state government, can open NPS -Swavalamban account.

But there are certain condition that the subscriber of NPS should not be covered under following social security schemes-

• Employees’ Provident Fund and Miscellaneous Provisions Act, 1952
• The Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948
• The Seamen’s Provident Fund Act, 1966
• The Assam Tea Plantations Provident Fund and Pension Fund Scheme Act, 1955
• The Jammu and Kashmir Employees’ Provident Fund Act, 1961.

Some of the benefits of the National Pension System (NPS) are:

1. It is transparent – NPS is a transparent and cost-effective system wherein the pension contributions are invested in the pension fund schemes and the employee will be able to know the value of the investment on day to day basis.
2. It is simple – All the subscriber has to do, is to open an account with his/her nodal office and get a Permanent Retirement Account Number (PRAN).
3. It is portable – Each employee is identified by a unique number and has a separate PRAN which is portable i.e., will remain same even if an employee gets transferred to any other office.
4. It is regulated – NPS is regulated by Pension Fund Regulatory and Development Authority- External website that opens in a new window, with transparent investment norms & regular monitoring and performance review of fund managers by NPS Trust- External website that opens in a new window.

Presently, the tax treatment for the contribution made in Tier I account is Exempted-Exempted-Taxed (EET) i.e., the amount invested in the account is entitled to a deduction from gross total income (total income of subscriber before deducting any tax) up to Rs.1.5 lakh as per section 80C. For example, if Mr. A’s gross total income of 2016 is 5 lakh and the amount invested in Tier I account of NPS is 1 lakh, so the final taxable amount of subscriber will be 5 lakh minus 1 lakh.