To replace the defined-advantage Old Pension System, the defined-contribution New Pension System (NPS) was very first introduced for government workers, which was later opened for non-government sectors and the common public.
Entry and Maturity Age
In sync with the retirement age of government workers, the NPS was earlier permitted to continue up to 60 years of age. However, the entry age of joining NPS has now been enhanced to 65 years of age and the maturity age to 70 years.
So, an person might now join NPS even just after 60 years of age till becoming 65 years old and the NPS beneficiaries might continue the scheme till 70 years of age. Individuals joining the scheme just after 60 years of age will have the selection of standard exit just after 3 years from the date of joining.
Commutation and Pension
On standard exit a beneficiary gets the selection to commute up to 60 per cent of retirement corpus and wants to invest at least 40 per cent of the corpus quantity to acquire a pension program from an IRDA-regulated insurance coverage firm.
However, if a beneficiary, who joined just after 60 years of age, moves out of NPS just before completion of 3 years from the date of opening a Tier-1 account, 80 per cent of the corpus has to be used to acquire a pension program and only 20 per cent can be commuted.
Amount of Pension
The quantity of pension will rely on the price of annuity provided by the pension provider – i.e. the insurance coverage firm from which a pension program is bought – at the time of acquiring the pension program.
National Pension System: What occurs to your pension if no NPS annuity provider is selected?
The annuity price depends on the general interest price in the economy. That suggests, if the crucial policy prices set by the Reserve Bank of India (RBI) are higher, the annuity price will be higher and if the policy and Bond/FD prices are low, the annuity price will also be low.
Apart from the general interest prices, the annuity price will also rely on the annuity selection selected. For instance, the price of annuity for the “annuity for life” selection will be greater than the “annuity for life with return of purchase price” selection.
So, the quantity of pension will rely on the quantity of corpus invested, general interest price in the economy, the prices provided by the insurance coverage provider and choice of the annuity selection.