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NPS FAQs

  • What is the National Pension System (NPS)?
    National Pension System (NPS) is a pension cum investment scheme launched by the government of India to provide old age security to its citizens. Residents and non-residents between the ages of 18 and 65 can join NPS. It is managed by a Pension Fund Manager (PFM).
  • Who is a Pension Fund Manager (PFM)?
    A Pension fund Manager (PFM) is an intermediary under NPS who carries out the responsibility for receiving contributions, managing corpus, making payments to the subscriber through the Central Recordkeeping Agency (CRA) and publishing the daily NAV of each scheme as per guidelines specified by the regulator.
  • What is Pension Fund Regulatory and Development Authority (PFRDA)?
    NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), it ensures transparency, does performance reviews, and monitoring of fund managers.
  • Who Can Invest in NPS?
    Resident Indians who hold individual accounts with Zerodha can invest in NPS. NRIs, joint account holders, and non-individual account holders (company, partnership, HUF, etc.) cannot invest in NPS.
  • What is a Permanent Retirement Account Number (PRAN)?
    A Permanent Retirement Account Number (PRAN) serves as a unique identification number for a NPS account.
  • What are Auto Choice and Active Choice in NPS?
    Investors can choose between two asset allocation options, they are:
    Auto Choice: The asset allocation between equity, government, and corporate bonds is automatically adjusted based on the subscriber's age. Depending upon the risk appetite, a subscriber can also choose between aggressive, moderate and conservative within the auto choice. The Investment options under NPS (PDF) tabulates the exposure to different asset classes.
    Active choice: The asset allocation can be chosen by the subscriber, subject to the following limits:
    • The maximum allocation to equity is 75%.
    • The maximum allocation to corporate bonds is 100%.
    • The maximum allocation to government bonds is 100%.
    • The maximum allocation to alternative assets such as Real Estate Investment Trusts (REIT), Infrastructure Investment Trusts (INVIT), Alternative Investment Funds (AIF), Mortgage Backed Securities (MBS) etc. is 5%.
  • What is the lifecycle of an individual participating in NPS from enrollment to post-retirement?
    The lifecycle of an individual participating in NPS from enrollment to post-retirement is as follows:
    • An individual decides to join the NPS and completes the necessary paperwork through a Point of Presence (PoP) or online registration.
    • Upon successful enrollment, the individual receives a Permanent Retirement Account Number (PRAN), which serves as a unique identification number for their NPS account.
    • The individual starts making regular contributions to the NPS account, with contributions being allocated to the chosen asset class (equity, corporate bonds, and government securities).
    • After completing a minimum of 3 years as an NPS subscriber, the individual has the option for partial withdrawals for specific purposes like education, marriage, home purchase, or medical emergencies.
    • Upon reaching the age of 60, the individual has the option to withdraw up to 60% of their NPS corpus as a lump sum. The remaining 40% must be used to purchase an annuity plan, ensuring a steady income during retirement. An annuity is a product that pays out a regular and predictable income to support the individual's living expenses in retirement.
  • What are the charges to Invest in NPS?
    To open an NPS account, Zerodha charges a fixed account opening charge of ₹200 + 18% GST along with a commission of 0.25% of the investment amount (capped at ₹25,000) or ₹30 (whichever is higher) plus 18% GST.
    For example, the account opening charge for an investment of ₹1000 would be ₹236 (₹200 + 18% GST) along with a commission of ₹35.4 (0.25% of the investment or ₹30 (whichever is higher), plus 18% GST). The total charge would be ₹271.4 (₹236 + ₹35.4).
  • How to invest in NPS through Zerodha?
    To learn how to invest in NPS through Zerodha, see How to invest in National Pension System (NPS) on Coin?
  • What are Point of Presence (POPs)?
    Point of Presence (PoPs) are entities appointed by the PFRDA to assist with opening and maintaining the NPS accounts.
  • Can existing NPS subscribers shift from another CRA/POP to Zerodha?
    No, as of now, existing NPS subscribers cannot shift from another CRA/POP to Zerodha.  Zerodha is working on enabling the migration of NPS subscribers from one NPS service provider to another.
  • What are Tier I or Tier II schemes?
    Tier I: All investments are locked in until the age of 60.
    Tier II: No lock-in, NPS subscribers can invest and withdraw anytime, similar to mutual funds. Zerodha currently does not offer this.
  • Are NPS investments made through Zerodha in Tier I or Tier II schemes?
    NPS investments made through Zerodha come under Tier I schemes. A subscriber qualifies to invest in Tier II schemes only if they have an existing investment in Tier I. If they do, log in to nps.kfintech.com/login/login with the PRAN PRAN and enable Tier II investments.
  • Can NPS investments be pledged for collateral margin?
    No, NPS investments cannot be pledged for collateral margin. The list of stocks and mutual funds that can be pledged with Zerodha for margins and the applicable haircut % can be found in this list (DOC).
  • Are NPS investments held in the demat account?
    No, NPS investments are not held in the demat account. They are held in the Statement of Account (SOA) form and can be tracked on Coin. Clients can also log in to nps.kfintech.com/login/login using their PRAN to track investments.
  • Why is the error Your bank details have to be verified to open a NPS account displayed?
    The error Your bank details have to be verified to open a NPS account is displayed if the bank is not verified by penny drop. Create a ticket and attach the latest 6-month bank statement or a personalised cancelled cheque of the primary bank account.
  • Why is the error Photo not found displayed?
    The error Photo not found is displayed for old Zerodha account holders. As per the PFRDA, a photograph is required to open an NPS account. Create a ticket and attach a passport-size photograph.
  • What does superannuation mean?
    Superannuation refers to the withdrawal of NPS after attaining the age of 60 years.
  • What is the maximum age to subscribe to NPS?
    The maximum age to subscribe to NPS is 65. The subscriber can continue investing in NPS upto the age of 70, after which they must exit.
  • Does Zerodha provide corporate NPS?
    No, currently, Zerodha does not offer corporate NPS.
  • What is a Central Recordkeeping Agencies (CRAs)?
    Central Recordkeeping Agencies (CRAs) facilitate the management of NPS investments and provide essential services for investors. Popular CRAs are NSDL Protean, CAMS & Kfintech.
  • Can NPS investments made through Zerodha be tracked on the CRA website?
    Yes, NPS investments made through Zerodha be tracked on Kfintech.
  • What is the minimum investment that needs to be made to NPS?
    A minimum of ₹1,000 per financial year needs to be invested in NPS under Tier I. Failing which, the Central Recordkeeping Agencies (CRAs) will freeze the NPS account. To unfreeze, subscribers are only required to invest. Zerodha currently does not offer Tier II schemes. There are no lower or upper limits to the number of contributions per year. The subscriber is free to manage the frequency and amounts of contributions.

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