Focus: GS II- Government Policies and Interventions
Why in News?
As informed by Pension Fund Regulatory and Development Authority (PFRDA), the number of beneficiaries above the age of 60 years, under the National Pension System (NPS) is 5,67,116.
About National Pension System
- National Pension System is a defined contributory pension introduced by Government of India.
- Any employee from public, private and even the unorganised sectors can opt for this. Personnel from the armed forces are exempted.
- The scheme is open to all across industries and locations.
The other eligibility criteria for opening an NPS account:
- Must be an Indian citizen.
- Must be between the ages of 18 and 65.
- Must be KYC compliant.
- Must not have a pre-existing NPS account.
- NPS offers returns higher than traditional instruments like the PPF (Public Provident Fund).
- It offers many investment options to subscribers who also have a say in where their funds are invested.
- The NPS reduces the retirement liabilities of the government.
- If the subscriber has been investing for at least three years, he/she can withdraw up to 25% for certain purposes before retirement (age 60). This withdrawal can be done up to 3 times with a gap of at least 5 years between each withdrawal. These restrictions are only for tier I and not tier II accounts.
- The entire amount cannot be withdrawn by the account-holder on retirement [Changes to be introduced]. As of April 2021, 60% can be withdrawn which has now been made tax-free. The rest 40% has to be kept aside so that the subscriber can receive a regular pension from an insurance firm.
- Pension Fund Regulatory and Development Authority (PFRDA) is the Statutory Body established by the PFRDA Act, 2014.
- PFRDA was established to regulate, promote and ensure orderly growth of the National Pension System (NPS) and pension schemes to which this Act applies.