InvestorQ : What is a Tier-II National Pension Scheme (NPS) account?
Ishita Jain made post

What is a Tier-II National Pension Scheme (NPS) account?

user profile image
Nishita Gala answered.
1 year ago

The National Pension Scheme is a voluntary and long-term investment plan for Indian citizens who want to create their retirement corpus.

The scheme comes under the purview of the Pension Fund Regulatory and Development Authority (PFRDA) and invests one’s savings in debt and equity market, based on the insured individual’s preference. Accordingly, there are two types of NPS accounts:

- Tier-I or Tier-1

- Tier-II or Tier-2

As the name suggests, the Tier-II NPS account is an advanced NPS account, with Tier-I being the basic account. NPS Tier-II, unlike Tier-I account, is a non-retirement NPS account. The government allows private and public sector employees as well as self-employed individuals to invest in it.

Subscribers of NPS Tier-II accounts have the freedom to select any fund manager within the NPS. Currently there are eight fund managers in the NPS. These are:

1. UTI Pension Fund

2. SBI Pension Fund

3. LIC Pension Fund

4. HDFC Pension Fund

5. Kotak Pension Fund

6. ICICI Pension Fund

7. Reliance Pension Fund

8. Aditya Birla Sun Life Pension Fund

Only those investors who have a Tier-I account can open a Tier-II account.

The government hasn’t kept any minimum balance requirement or minimum annual contribution for an NPS Tier-II account. There was previously a minimum balance requirement of Rs 2,000 at the end of each financial year, but this was removed by the PFRDA in 2016. However, the minimum contribution amount is Rs 250.

Eligibility criteria for individuals who want to open the Tier-II NPS account are:

- He/she needs to be a citizen of India

- He/she can be a non-resident Indian as long as he/she is an Indian citizen

- He/she should be between 18 and 65 years of age

- He/she must have an active Tier-I account