Complete information on New Pension Scheme (NPS) Tier 2 account

SOURCE;ASSET TREAT Complete information on New Pension Scheme (NPS) Tier 2 account The NPS was launched on 1st May 2009 for all citizens on ...

SOURCE;ASSET TREAT

Complete information on New Pension Scheme (NPS) Tier 2 account



The NPS was launched on 1st May 2009 for all citizens on India. The offer document issued at the launch of NPS mentioned that under NPS two types of account would be available to the subscribers viz., Tier-I account-where you contribute your savings for retirement into a non-withdrawable account, and a Tier-II account –a voluntary savings account form which you are free to withdraw your savings whenever you wish.



While the Tier I account was made available from May 1, 2009, the facility of Tier II account is being offered form December 1, 2009 to all citizens of India including Government employees mandatorily covered by NPS. The salient features of Tier II account are given in the following paragraphs.



Unlike Tier I which is a non-withdrawable pension account with an aim to provide a window of liquidity to NPS subscribers. Both tier I (Pension Account) and Tier II (Savings Account) will be pure retirement savings products, the only distinction being that Tier I is a non-withdrawable account while Tier-II is a withdrawable account to meet financial contingencies.





The Tier-II would enable the existing Permanent Retirement Account (PRA) holders to build savings through investments over and above those in the Tier I pension account. An active Tier I account will be a pre-requisite for opening of a Tier II account.





Key features of Tier-II account

• No additional CRA charges will be levied for account opening and annual maintenance in respect of Tier II. However, CRA will charge separately for each transaction in Tier II, the charges being identical to the transaction charge structure in Tier I.

• There will be no limits on number of withdrawals.

• There will be facility for separate nomination and scheme preference in Tier II.

• The subscriber would have the same choice of PFMs and schemes as in the case of Tier I

account in the unorganized sector.

• Contributions can be made through any POP/POP-SP.

• There will be facility of one-way transfer of savings form Tier II to Tier I.

• Bank details will be mandatory for opening a Tier II account.

• No separate KYC for Tier II account opening will be required; the only requirement is a preexisting Tier I account.





Minimum contribution requirements:

1. Minimum contribution at the time of account opening - Rs. 1000/-

2. Minimum amount per contribution - Rs. 250/-

3. Minimum Account Balance at the end of FY - Rs. 2000/-

4. Minimum number of contributions in a year - 4

(Minimum One contribution in case a subscriber joins in the last quarter)

5. Penalty of Rs. 100/- to be levied on the subscriber for not maintaining the minimum Account balance and/or not making the minimum number of contributions.





Charge Structure for PoPs:

1. New account opening charges (Tier 1 & II both) - Rs. 40/-

2. Tier II activation for existing subscribers of Tier I - Rs. 20/-









Main features of Tier II account vis-à-vis Tier I account of NPS










S.no  Functionality   Tier I Tier II 
 1  Registration  Registration

 through PAOs

 for government 

 subscribers and 

through POP-SP

for all other

 subscribers. KYC

 to be done by

 POP-SP.

 Registration only 

through POP-SP

 for Government

 as well as all other 

subscribers. PRAN 

card to act as KYC,

 no separate 

 required.

 2  contribution  Government

subscriber

Mandatory

contribution

through

PAO/CDDO for

  Government

subscribers

 (10% + 10% of

 Basic +DA per month)



Other subscribers
(all
citizen those 
mandatorily
covered by NPS
Minimum four
 contribution in a year
·         Minimum 
contribution Rs 6000/- p.a.
·         Minimum 
Contribution Rs 500/-
 per contribution


   Voluntary contribution

through POP/POP-SP 

for Government as well

as other subscribers.

·         Minimum contribution
 of Rs 1000/- at the time
 of account opening.
·         Minimum contribution
 of Rs 250/- per contribution
·         Minimum balance 
of Rs. 2000/- at the end of 
each financial year
 3  Scheme

preference
 Unorganized 

sector subscribers



3 Asset classes and 6 PFMs
·         Availability of Auto
 Choice
Government Subscribers
Default Scheme under 
Tier I
3 PFMs
 All subscriber

 shall have



Choice of six PFMs
 and three assets 
classes (E,C,G)
·         Availability
 of Auto Choice
 4  Bank

account
 Non Mandatory  Mandatory
 5  Withdrawals  No Withdrawals

allowed during

vesting period

 except as per the

 norms prescribed

 by PFRDA
 No Limit on Withdrawals

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