Pension fund regulator lowers minimum contribution for NPS to Rs1,000 per year
16 August 2016
The Pension Fund Regulatory and Development Authority (PFRDA) has substantially lowered the minimum annual contribution towards the National Pension System (NPS) to Rs1,000 to keep the account active and encourage more people to join the scheme.
Earlier, a subscriber had to contribute at least Rs6,000 in a financial year (April-March) to keep the Tier-1 account running.
NPS is structured into two tiers. Tier-I account is the non-withdrawable permanent retirement account into which the accumulations are deposited and invested as per the option of the subscriber. Tier-II is a withdrawable voluntary account.
In case of Tier-II account, which is a savings account, the regulator has decided to waive the requirement of annual minimum contribution of Rs250 and minimum balance of Rs2,000 at the end of a fiscal year.
As a one-time measure, the Pension Fund Regulatory and Development Authority (PFRDA) has also decided to unfreeze all the existing accounts in which the subscriber had failed to maintain minimum contribution and balance requirements.
All the subscribers whose accounts were frozen can now make contribution to their NPS account.
"With a view to encourage the access of NPS to all segments of the society including the unorganised sector, it has been decided to reduce the requirement of minimum contribution to keep the NPS Tier I account active, from Rs6,000 to Rs2,000," PFRDA said in a circular.
According to PFRDA, the NPS Tier II savings account has capacity to earn higher returns.
"Even though, the minimum balance requirement for keeping the account active has been reduced the subscribers are advised to contribute to their Pension Account (PRANs) as much as possible so as to get a decent pension and live dignified life post retirement," the regulator said.
Benefits or pension under NPS is based on the contributions made, the vesting period and returns generated theron.
NPS claims to have over 13 million subscribers with total asset under management (AUM) of more than Rs1,37,000 crore.