New Pension Scheme is an investment backed by the Government of India and is managed by Pension Fund Regulatory and Development Authority (PFRDA). This is also known as National Pension Scheme. The basic objective of the product is to help the investor build a retirement corpus. Any individual resident or nonresident, between the ages of 18-60 years can invest in new pension scheme. The scheme is structured as two types of NPS account.
- NPS Tier 1: It is basically for retirement planning. As the objective is to create retirement corpus, investment is meant for long term and restricts on withdrawal. At the end of the maturity period, 40% of the investment corpus has to be converted into annuity and the rest 60% can be withdrawn.
- NPS Tier 2: Basically, This investment is meant for short or medium term needs. It’s a voluntary account. Only Tier 1 investors can invest in this. There are no restrictions on the withdrawal also.