Everything You Need to Know About NPS Tier-II

In this article, you will understand more about NPS Tier-II, its features, benefits, and more.

Who Should Invest In NPS?

National Pension Scheme is best suited for individuals who are unable to decide their asset allocations or do not have time to manage their investment.

An NPS is a completely government-backed scheme and any person who wants to plan their early retirement and does not wish to take high risks should undoubtedly go for it.

A salaried person who wants to take the best advantage of 80C deductions should consider National Pension Scheme.

Types Of Accounts Under NPS

1. Tier-I Account

   • Functions as a pension account
   • Withdrawn are subject to specific restrictions
   • The account can be opened with a minimum deposit of 500 rupees

2. Tier-II Account

   • Functions as voluntary account
   • Offers liquidity of funds through investments and withdrawals
   • Account can be opened with a minimum deposit of 250 rupees
   • Tier-I account needs to be active to open a Tier-II account

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About Tier-II Account

Any Indian citizen who wishes to can opt for a National Pension Scheme account. once opted, the holder will have a Tier-I account by default.

The NPS holder can voluntarily opt for a Tier-II account. Once you get a Tier-II account, you can

• Invest in different funds
• Can withdraw money any time as there is no lock-in period
• Build a huge corpus towards retirement
• Invest 50% amount in equity funds
• Opt for auto-choice in which funds will be allotted based on your
• Income
• Age
• Risk profile

How To Open NPS Tier-II Account

You can either go for an offline or online method to open a National Pension Scheme Account

1. Offline:

   • The account can be opened through “Subscriber’s POP-SP”
   • Download Annexure-I Tier-II detail form
   • Fill it correctly and send it to POP-SP
   • Provide bank account details
   • Withdrawals will be directly transferred to the bank account provided

2. Online:

   • Open electronic National Pension System (eNPS)
   • Click the Tier-II activation tab
   • Fill in required details like,
     • Permanent Retirement Account Number (PRAN)
     • Date of Birth
     • PAN card
   • OTP will be generated on your registered mobile number
   • Next, fill in your bank account details
   • Validate your Aadhar card
   • Next, select your Pension Fund Manager
   • Click on the suitable investment option, that is,
     • Auto choice
     • Active choice
   • Upload all the necessary documents
   • Make a minimum payment of 1,000 rupees in the account
   • e-Sign the application
   • Your Tier-II account is successfully activated

Benefits Of Tier-II Account

Tier-II account under National Pension Scheme comes with the following benefits

• Flexible withdrawals
• No lock-in period
• No exit load application
• No annual maintenance charges
• Easy transfer of funds from Tier-I to Tier-II as and when required
• Nominee can be assigned

Eligibility Under Tier-II Account

• All Indian citizens whether residing in India or not can open an NPS account
• Age limit: 18 to 65 years
• Separate rules for people applying between 60-65 years of age

How To Exit NPS Tier-II Account

As per PFRDA Regulations of 2015, the reason for exit from Tier-II account must be one of the following:

1. Normal Superannuation

   • 40% of the account balance must be used to purchase an annuity
   • The annuity provides a monthly pension to the subscriber
   • Balance is returned in lump-sum
   • If the total corpus is less than equal to 2,00,000 rupees, complete withdrawal can be made

2. Death

   • 80% of the account balance must be used to purchase the annuity
   • The annuity provides a monthly pension to the spouse
   • Balance is returned in lump-sum to the nominee
   • If the total corpus is less than equal to 2,00,000 rupees, complete withdrawal can be made by the nominee

3. Premature Exit

   • 80% of the account balance must be used to purchase the annuity
   • The annuity provides a monthly pension to the subscriber
   • Balance is returned in lump-sum
   • If the total corpus is less than equal to 1,00,000 rupees, complete withdrawal can be made

Difference Between Tier-I And Tier-II Account Explained

Conclusion

National Pension Scheme is a reliable government-backed plan which creates a financial corpus for an individual even after retirement. With more amendments and improvisations being made by the government, this scheme is considered simple and easy than other pension schemes in the market.