Types of NPS Account, NPS Tier I Account

NPS or National Pension System is a pension scheme introduced by the government of India. PFRDA (Pension Fund Regulatory and Development Authority) manages and regulates this scheme. This scheme is helpful in creating retirement corpus for the individuals especially for those who do not have any source of income after their retirement. Any Indian citizen (whether resident or NRI), aged between 18 & 65 years, is eligible to invest in NPS.

National Pension Scheme (NPS) offers two types of accounts Tier I and Tier II. The features of both the accounts are given below:

NPS Tier I Account

• Tier I Account is a mandatory account
• Tier I Account is called "Pension Account"
• Minimum contribution of Rs 500 is required for Tier I account opening
• Minimum annual contribution required for this account is Rs. 1000
• Tier I account is non-withdrawable till the person reaches the age of 60
• Partial withdrawal from this account is permitted after 10 years of account opening

Who can invest in Tier I NPS Account

• Central Government Employees
• State Government Employees
• Corporate Employees
• Self Employed
• Businessmen

Tier I Account: Investments

• Government Securities: Lower Risk & Steady Returns (Expected returns: 7-8%)
• Corporate Bonds: Moderate Risk & Moderate Returns (Expected returns: 9-10%)
• Equities: High Risk & High Returns (Expected returns: 13-14%)

NPS Tier II Account

• Tier II Account is a voluntary account
• Active Tier I NPS Account is a must criterion for opening Tier II NPS Account
• Minimum contribution of Rs 1,000 is required for Tier I account opening
• Subscriber cannot apply for only Tier II NPS Account
• Tier II account is just like a savings account in which the subscribers are free to withdraw the money as and whenever they require

Prerequisites for NPS Tier II Account

• Subscriber should have an active Tier I Account
• It is mandatory to have a permanent retirement account number (PRAN)

Difference between Tier I Account and Tier II Account of NPS

Majority of people do not know what is the meaning and difference of Tier 1 and Tier 2 Accounts of NPS. Given below is the table showing the difference between Tier I Account and Tier II Account of NPS: