AU Small Finance Bank NPS

What is AU Small Finance Bank NPS?

Under the National Pension Scheme, subscribers make a particular contribution on a regular basis during the period of their employment. Customers can initiate their investments through the AU Small Finance Bank. The size of the retirement corpus increases with time based on the contribution amounts, investment in it, and market performance. On retirement or exit, the accumulated corpus can be partially withdrawn as a lump sum, and the rest converted into an annuity to yield recurring pension amounts.

NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Initially, it was launched in 2004 for the employees of the Central Government and became available to the general citizens as well in 2009 under the All Citizen Model. The scheme is accessible to eligible Indian citizens, Non-Resident Indians (NRIs) who are aged between 18 and 70 years and under the rules prescribed, KYC requirements. 

Note: NPS is an individual pension account and cannot be opened on behalf of another person.

Types of AU Small Finance Bank NPS Accounts

Under the National Pension Scheme accessed through AU Small Finance Bank, each subscriber is allotted a unique Permanent Retirement Account Number (PRAN). The NPS accounts come in two types of the same PRAN, which are Tier I and Tier II.

• Tier I Account: This is the principal retirement savings account that is used by the subscribers to contribute towards retirement. The withdrawals in this account will be subject to the NPS rules, and the tax benefits are available only on investments made in this account.
• Tier II Account: It is an optional investment account that is highly liquid. Subscribers can withdraw money as per their needs without any constraint on exit. It requires an active Tier I account for its opening.

The main operational requirements for ensuring Tier I or Tier II NPS accounts are as follows:

Features of AU Small Finance Bank NPS

The following features make the National Pension Scheme accessible to the AU Small Finance Bank customers as per the PFRDA-prescribed rules and processes:

• Portability Across Employment and Location: NPS accounts accessed through AU Small Finance Bank remain portable across changes in jobs, sectors, and locations, without the need to open a new account.
• Multiple Modes for Contributions and Service Requests: Subscribers can make contributions and submit service requests through AU Small Finance Bank branches or authorised digital platforms, as permitted under NPS guidelines.
• Partial Withdrawal Facility: NPS allows partial withdrawal up to 25% of the subscriber's own contributions. It can be applied upon completion of three years of service, for specified purposes, with a limit of three withdrawals that the subscriber may make throughout the tenure.
• Centralised Grievance Redressal Mechanism: The complaints by the subscribers are processed by the Central Grievance Management System (CGMS) with a stipulated resolution period of up to 30 days.
• Choice of Pension Fund and Investment Pattern: Subscribers may select their Pension Fund Manager and investment option under:
• Active Choice with allocation limits such as Equity - 75% (up to age 50, tapering thereafter), Corporate Bonds - 100%, Government Securities - 100%, and Alternate Assets - 5%.
• Auto Choice Life Cycle Funds such as LC25 (Conservative), LC50 (Moderate- default), and LC75 (Aggressive).

Applicable Charges Under the AU Small Finance Bank NPS

These charges apply to NPS services offered by AU Small Finance Bank as a registered Point of Presence (PoP), in line with PFRDA guidelines:

Note: Only charges related to services provided by AU Small Finance Bank are shown here. Other NPS charges are prescribed by PFRDA and apply separately.

Documents Required to Open an AU Small Finance Bank NPS Account

To open an NPS account with the AU Small Finance Bank, the applicants have to fill out a duly completed Subscriber Registration Form (physical or online) and provide the necessary KYC documents, where needed.

• One recent passport-size photograph
• PAN card
• Proof of address
• Proof of bank account (savings account for residents; NRE or NRO account for NRIs and OCIs)
• Identity document: Indian passport (for NRIs) / OCI card (for OCIs)

How to Open an AU Small Finance Bank NPS Account?

The AU Small Finance Bank NPS account can be opened both online and offline, based on the preference of the subscriber.

Online Process

You can open an NPS account online from the comfort of your home with AU Small Finance Bank as a Point of Presence.

• Visit the NPS page: Log in to AU Small Finance Bank NetBanking.
• Choose the registration option: View the National Pension Scheme section and select ‘New Registration.'
• Complete KYC: Enter PAN details and complete PAN-based verification.
• Provide account details: Fill in complete personal information, nominee information, and bank account information.
• Make initial contribution: Pay the minimum required amount online.
• PRAN generation: PRAN is created once the submission is successful.

Offline Process

Subscribers can open an NPS account offline through an AU Small Finance Bank branch.

• Visit a branch: Visit the closest AU Small Finance Bank branch.
• Collect application form: Take and complete the Subscriber Registration Form (CSRF/NRSF).
• Submit documents: Provide required KYC documents and recent photographs.
• Select investment options: Select a pension fund manager, an investment option, and details on contribution.
• Make initial contribution: Pay money in the form of cash, cheque, or account transfer.
• PRAN issuance: PRAN is issued once document verification and processing are done.

Withdrawal Rules for AU Small Finance Bank NPS Account

The PFRDA regulations that govern withdrawals on an AU Small Finance Bank NPS account vary depending on the subscriber category and other circumstances of the withdrawal.

1. Partial Withdrawal (Tier I – All Subscribers)

   • Permitted upon completion of 3 years of opening the account.
   • Restricted by a maximum of 25% of the own contributions of the subscriber (excluding employer contribution, if any).
   • Allowed to be used under specified purposes, e.g., education, marriage, purchase or construction of a residential house, medical treatment, or repayment of loans made on NPS.
   • Partial withdrawals are limited in number within the subscription period as required by PFRDA.

2. Exit Before Age 60

   Government Subscribers

   • The accumulated pension wealth can be withdrawn in a lump sum of up to 20%.
   • A minimum of 80% should be used to purchase an annuity.
   • In case the cumulative income of the pension scheme is ₹5 lakh or below, a 100% lump-sum withdrawal is allowed.

   Non-Government Subscribers (All Citizens / Corporate)

   • The pension wealth can be withdrawn in the form of a lump sum up to 20% of the amount accumulated.
   • The remaining 80% should be allocated to be used in purchasing annuities.
   • Full withdrawal may be made in case of a total corpus of ₹5 lakh or below.

3. Exit at Age 60 or Superannuation

   Government Subscribers

   • As much as 60% of the accruing pension wealth can be withdrawn in the form of a lump sum.
   • An annuity should be purchased with a minimum of 40%.
   • In the case of the total corpus of ₹8 lakh or less, a 100% lump withdrawal is allowed.
   • In case of a corpus of ₹8 lakh to ₹12 lakh, structured withdrawal options are provided as per the requirement.

   Non-Government Subscribers

   • The pension wealth can be retrieved in the form of a lump sum up to 80% of the entire accumulated sum.
   • At least 20% must be utilised for annuity purchase.
   • In case of the total corpus of ₹8 lakh or less, full withdrawal is allowed.
   • The 80:20 structure is mandatory in the case of a corpus of above ₹12 lakh.

4. Joining NPS at or After Age 60 (Non-Government Subscribers)

   • A lump sum of up to 80% of the accumulated corpus can be taken out on exit.
   • The rest 20% has to be spent on purchasing an annuity.
   • In case the total corpus is ₹12 lakh or lower, a 100% lump-sum withdrawal can be made.

5. On the Subscriber's Death

   Government and Non-Government Subscribers

   • The whole pension money invested is to be paid to the nominee or legal heir.
   • There is no mandatory annuity requirement on death.
   • The nominees are allowed to select lump-sum or structured payouts according to the PFRDA regulations.

Tax Implications on AU Small Finance Bank NPS

AU Small Finance Bank customers can avail of National Pension Scheme tax benefits on contributions, subject to applicable income tax rules.

Note: NPS income in the form of an annuity is taxable according to the relevant income tax brackets. The taxation of withdrawal is under the existing income tax regulations upon exit.

Key Takeaways

The AU Small Finance Bank NPS is a government-backed pension scheme that is regulated by PFRDA. It is open to resident Indians as well as NRIs between the ages of 18 and 70, and is based on a defined contribution, market-linked investment model. Subscribers have access to a mandatory Tier I account (accessible to tax benefits) and an optional Tier II account for additional investments. Contributions help build a retirement corpus, with withdrawals and annuity requirements governed by NPS rules. Investors can also plan contributions with the help of the AU Small Finance Bank NPS Calculator, which allows them to estimate retirement corpus and projected pension results.