NPS is a voluntary, defined contributions retirement savings scheme introduced by the Pension Fund Regulatory and Development Authority (PFRDA) to promote old age income security to all citizens of India including workers of the unorganized sector. It is administered and regulated by PFRDA and operated with the participation of Central Record Keeping Agency (CRA) – NSDL e-Governance Infrastructure Limited & KFin Technologies Private Limited.

Resident or Non- Resident Indian between age group of 18 to 70 years, salaried or self-employed, can join this scheme. The people within age group 60-70 can also join/re-join NPS. The account can be opened by individual and corporate.

Under NPS account, two sub-accounts – Tier I and Tier II are provided. Tier I account is mandatory, and the subscriber has the option to opt for Tier II account opening and operation. Tier II account can be opened only when Tier I account exists. Tier I account is a retirement and pension account which can be withdrawn only upon meeting the exit conditions prescribed under NPS. The initial amount while opening NPS account is Rs. 500/- with Minimum Yearly Contribution of Rs. 1000/-. There is no upper limit for the maximum contribution. Tier II account is a voluntary investment facility. The minimum amount per contribution is Rs 250/- and there is no upper limit for the maximum contribution. The subscribers are free to withdraw their savings from this account whenever they wish.

The funds will be invested in 4 different classes: Equity, Government Securities, Corporate Debts & Alternate Investment Fund (A). The investor has 2 Investment options for managing the fund: Auto and Active. In the active choice, subscribers are free to allocate the investment across the asset class provided E/C/G/A. In the auto choice, the management of investment of the fund is done automatically based on the age profile of the subscriber.

The withdrawal treatment is different, based on the criteria if the subscriber registration is before 60 years and after 60 years. For subscriber registration after 60 years, a pre-mature closure is possible, and the subscriber has to compulsorily annuitize 80% of the accumulated pension wealth, and the remaining 20% can be withdrawn as a lump sum. If the corpus is less than Rs. 2.50 Lakhs, then a complete withdrawal is permitted. After attaining 60 years of age, up to 60% of the corpus can be withdrawn. The subscriber is required to invest a minimum of 40% of the accumulated savings (Pension Wealth) to be kept as an annuity. At the time of maturity, the whole 60% can be withdrawn as a lump sum, and the remaining 40% will be invested to receive a regular pension. In case of the subscriber's death, the entire accumulated pension fund will be paid to the nominee/s or legal heirs, as per norms. No family pension is available under the scheme.