To encourage more people to join the National Pension System, regulator PFRDA has substantially lowered the minimum annual contribution to Rs 1,000 to keep the account active. Earlier, a subscriber had to contribute at least Rs 6,000 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 voluntary withdrawable 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 Rs 250 and minimum balance of Rs 2,000 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 Rs 6,000 to Rs 2,000,” PFRDA said in a circular.
PFRDA said 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. NPS has over 1.30 crore subscribers with total Asset Under Management (AUM) of more than Rs 1.37 lakh crores.