Post Office National Pension Scheme(NPS)

What is NPS Scheme?

India Post offers a range of facilities to Indian citizens besides delivering posts. You can save and invest with the post office with different types of savings accounts and deposit schemes. Moreover, the post office also allows you to invest in the National Pension System which was introduced by the Government. 

The Government of India introduced the retirement-oriented National Pension System (NPS) for the common public in May 2009. This is a long-term investment scheme wherein you have to invest every year till you reach 60 years of age. The investment is market-linked wherein the money that you invest is allocated to market-linked funds for inflation-adjusted growth. 

On maturity, you are allowed to withdraw a part of your corpus as a lump sum benefit while the remaining part of the corpus is used to pay annuities for your lifetime.

NPS Scheme Details

The post office has been authorized by the Pension Fund Regulatory and Development Authority (PFRDA) to act as a Point of Presence (POP). A POP is a designated place from where you can invest in the NPS scheme. So, if you are looking to invest in the National Pension Scheme, you can visit the nearest post office and apply for the same.

All the Head Post Offices in India serve as a POP Service Provider that allows you to invest in the NPS scheme in the post office. You can visit these head post offices and invest in the NPS scheme offline. For investing in the National Pension Scheme in the post office, the steps are as follows –

• Visit the nearest post office which serves as the POP-SP. To get the list of the POP-SPs you can visit the link https://npscra.nsdl.co.in/pop-sp.php and select your State and Location. You would, then, get a complete list of the POP-SPs which accept offline registration forms
• At the POP-SP, avail of the subscriber registration form and fill it up stating all the relevant details. The form can also be downloaded using the link https://www.npscra.nsdl.co.in/download/government-sector/central-government/forms/CSRF%20Subscriber%20Registration%20Form.pdf
• Along with the form, you should submit your KYC documents which include your identity proof, age proof, address proof, and photographs.
• Also, submit a FATCA self-certification for registering for the NPS account in the post office
• Pay the contribution amount for opening the desired account. For Tier, I Account you need to make a minimum contribution of Rs.500 to open the account. For Tier II Account, however, the amount is Rs.1000
• There are some charges levied by the post office as well as the Central Recordkeeping Agency (CRA). Pay the relevant charges for completing the registration formalities
• Once the formalities are done, the post office would verify the details and open your NPS account. You would also receive a Permanent Retirement Account Number (PRAN) when your NPS account in the post office is opened

Eligibility requirements for post office NPS

To open an account of the National Pension Scheme, the post office has specified an eligibility requirement which you should fulfil. These requirements are as follows –

• You should be aged between 18 and 65 years
• You should be an Indian citizen
• You should not qualify for NPS under any other sector
• One minimum contribution is required every financial year. The amount of such a contribution should be Rs.500 or above
• In one financial year a minimum contribution of Rs.1000 should be made in the Tier I Account

Transaction charges for Post Office National Pension System

To subscribe to post office National Pension System, the following transactional charges would have to be paid –

• Registration charge of Rs.200 without taxes at the time of registering for the scheme
• Contribution charge of 0.25% of each contribution made to the NPS scheme in the post office. The minimum charge payable would be Rs.20 and the maximum would be Rs.25, 000
• A service charge of Rs.20, excluding taxes, for each service request made on the post office

How does the post office NPS scheme work?

The NPS scheme is a market-linked scheme and there is no guaranteed national pension scheme interest rate. When you subscribe to the scheme, you have to open a Tier I Account compulsorily. You are offered a choice of two investment strategies. 

Under the Active Choice option, you get four types of investment funds – Asset Class E, C, G, and A. Asset Class A invests in alternate instruments and you can invest a maximum of 5% in this fund. You can then choose to invest in the other available funds as per your investment preference and risk appetite. The other option is the Auto Choice strategy. 

If you choose this option, you would be given a choice of three risk profiles – Aggressive, Moderate, and Conservative. Thereafter, depending on the risk profile that you choose, your investment would be allocated to Asset Class E, C, and G in predefined proportions. You can switch between the investment strategies and also change the chosen funds under the Active Choice strategy. 

You should also choose the pension fund manager for managing your investments. There are eight pension fund managers which are –

• LIC Pension Fund
• ICICI Prudential Pension Fund
• Reliance Capital Pension Fund
• DSP Blackrock Pension Fund Managers
• SBI Pension Fund
• UTI Retirement Solutions Pension Fund
• Kotak Mahindra Pension Fund
• HDFC Pension Management Company

On maturity, you can withdraw up to 60% of the corpus in a lump sum. This would be tax-free in your hands. The rest of the corpus would be used to pay annuities. You can choose from a list of different annuity providers to receive annuity payments. 

Moreover, there are different types of annuity payment options that you can choose as per your requirements.

Post Office NPS Calculator

The post office calculator is an easy-to-use and hassle-free tool, Post Office National Pension Scheme Calculator calculates the lump sum to be received by entering basic details that are related to the scheme. 

NPS Benefits

Here are some of the benefits which you can get when you invest in the NPS scheme in the post office –

• You can invest easily since post offices allow the easy mode of investment
• The investment is affordable and you  can put aside little amounts every year to create a considerable retirement corpus
• The pension payments ensure that you get regular incomes even after retirement
• Since the NPS scheme is market-linked, you get attractive  NPS returns on your investments, and these returns also multiply due to compounding is given the long term nature of the scheme
• The investment done into the NPS scheme is allowed as a deduction. You can claim a maximum deduction of up to Rs.2 lakhs under Sections 80CCD (1) and 80CCD (1B) by investing in the NPS scheme. Moreover, if your employer also contributes to the NPS scheme in the post office on your behalf, you can claim an additional deduction of up to 10% of your salary under Section 80CCD (2)
• Though the scheme is long term in nature, it allows partial withdrawals from the third year for meeting important financial needs

FAQs on Post Office National Pension Scheme (NPS)

Q1. Who is responsible for the calculation of interest in NPS?

The interest of NPS is calculated by the Pension Accounting Office – the official body appointed for this particular task.

Q2. Are the employees that are engaged in government service eligible for leave encashment according to the NPS guidelines?

No. The leave encashment is not allowed according to the guidelines of NPS laid down by the CCS. It does not count as a component of the merits available to the employee after retirement.

Q3. How do I check the status of my NPS account in a bank?

You can log in to the customer portal of the bank and fill in the details like Customer ID and NPS policy number to view your current status.

Q4. Is NPS an accessible system for long-term investment?

NPS is a cost-effective, and good retirement saving scheme, where the wealth accumulated depends on the contributions made by the individual.

Q5. What are the features of the NPS application?

Using the NPS application, you can raise a request for a transaction statement for a specific fiscal year. You could also view the details of scheme-wise units and update your contact info.