1. What is the National Pension System (NPS)?
The National Pension System (NPS) is a pension cum investment scheme launched by the government of India to provide old age security to its citizens. You can join NPS if you are between 18 and 85 years of age as on the date of submission of your application to the PoP/PoP-SP, or online through e-NPS. A Pension Fund Manager (PFM) manages the scheme.
2. Who is a Pension Fund Manager (PFM)?
A Pension Fund Manager (PFM) is an intermediary under NPS who carries out the following responsibilities:
- Receiving contributions and managing the corpus.
- Making payments to the subscriber through the Central Recordkeeping Agency (CRA).
- Publishing the daily Net Asset Value (NAV) of each scheme as per the guidelines specified by the regulator.
3. What is the Pension Fund Regulatory and Development Authority (PFRDA)?
The Pension Fund Regulatory and Development Authority (PFRDA) regulates NPS. It ensures transparency, conducts performance reviews, and monitors fund managers.
4. Who can invest in NPS?
Resident Indians who hold individual accounts with Zerodha can invest in NPS. The following cannot invest in NPS:
- Non-Resident Indians (NRIs).
- Joint account holders.
- Non-individual account holders (company, partnership, Hindu Undivided Family (HUF), etc.).
5. What is a Permanent Retirement Account Number (PRAN)?
A Permanent Retirement Account Number (PRAN) is a unique identification number for your NPS account.
6. What are Auto Choice and Active Choice in NPS?
You can choose between two asset allocation options:
Auto Choice: The asset allocation between equity, government, and corporate bonds is automatically adjusted based on your age. Depending on your risk appetite, you can also choose between aggressive, moderate, and conservative within the Auto Choice. The investment options under NPS tabulate the exposure to different asset classes.
Active Choice: You can choose the asset allocation yourself, 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%.
7. 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:
- You decide to join NPS and complete the necessary paperwork through a Point of Presence (PoP) or online registration.
- Upon successful enrollment, you receive a Permanent Retirement Account Number (PRAN), which serves as a unique identification number for your NPS account.
- You start making regular contributions to your NPS account, with contributions allocated to your chosen asset class (equity, corporate bonds, and government securities).
- You can make partial withdrawals up to 4 times during your tenure, once every 4 years, up to 25% of your own contributions. There is no lock-in period on withdrawals.
- Upon reaching the age of 60, you can withdraw up to 60% of your NPS corpus as a lump sum. You must use the remaining 40% 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 your living expenses in retirement.
8. 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). To learn more about charges for investing in NPS, see What are the charges for investing in NPS using Coin?
9. How to invest in NPS through Zerodha?
You can invest in NPS directly through Coin by Zerodha by navigating to the NPS section on your dashboard, completing your profile and nominee details, selecting a pension fund, and making a payment via Net Banking or UPI.
10. What are Points of Presence (PoPs)?
Points of Presence (PoPs) are entities appointed by the PFRDA to assist with opening and maintaining NPS accounts.
11. Can existing NPS subscribers shift from another CRA/PoP to Zerodha?
No, existing NPS subscribers cannot shift from another CRA/PoP to Zerodha at this time. Zerodha is working on enabling the migration of NPS subscribers from one NPS service provider to another.
12. What are Tier I and Tier II schemes?
- Tier I: All investments are locked in until the age of 60.
- Tier II: There is no lock-in period. NPS subscribers can invest and withdraw anytime, similar to mutual funds. Zerodha currently does not offer Tier II schemes.
13. Are NPS investments made through Zerodha in Tier I or Tier II schemes?
NPS investments made through Zerodha come under Tier I schemes. You qualify to invest in Tier II schemes only if you already have an investment in Tier I. If you do, log in to nps.kfintech.com with your PRAN and enable Tier II investments.
14. Can NPS investments be pledged for collateral margin?
No, you cannot pledge NPS investments for collateral margin. You can find the list of stocks and mutual funds that can be pledged with Zerodha for margins, along with the applicable haircut percentage, in this list.
15. 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 you can track them on Coin. You can also log in to nps.kfintech.com using your PRAN to track your investments.
16. Why is the error "Your bank details have to be verified to open an NPS account" displayed?
This error appears if your bank account has not been verified by penny drop. Create a ticket and attach the latest month's bank statement or a personalised cancelled cheque of your primary bank account.
17. Why is the error "Photo not found" displayed?
This error appears for older 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.
18. What does superannuation mean?
Superannuation refers to the withdrawal of NPS after you attain the age of 60 years.
19. What is the maximum age to subscribe to NPS?
You should be between 18 and 85 years of age as on the date of submission of your application to the PoP/PoP-SP, or online through e-NPS. For more information, visit npstrust.org/eligibility.
20. Does Zerodha provide corporate NPS?
No, Zerodha does not currently offer corporate NPS.
21. What is a Central Recordkeeping Agency (CRA)?
Central Recordkeeping Agencies (CRAs) facilitate the management of NPS investments and provide essential services for investors. Popular CRAs are NSDL Protean, CAMS, and Kfintech.
22. Can NPS investments made through Zerodha be tracked on the CRA website?
Yes, you can track NPS investments made through Zerodha on Kfintech at nps.kfintech.com.
23. What is the minimum investment in NPS?
You need to invest a minimum of ₹1,000 per financial year in NPS under Tier I. If you do not meet this requirement, the CRA will freeze your NPS account. To unfreeze it, you only need to make an investment. There are no lower or upper limits on the number of contributions per year, so you can manage the frequency and amounts of contributions as you choose. Zerodha currently does not offer Tier II schemes.
24. Can investments be made in NPS Vatsalya?
No, you cannot currently make investments in NPS Vatsalya through Zerodha. Zerodha is working with the CRAs to provide this facility.
25. Where can I learn more about NPS?
To learn more about investing in NPS, visit the NPS: National Pension Scheme module.