The National
Pension System (NPS) is a defined-contribution pension system operated by the Government of
India. In
2004, the Government of India decided to move from a defined-benefit pension
system to a defined-contribution pension system. Apart from offering a range
of investment options to
employees, the scheme allows individuals to make decisions about where their
pension fund is invested, permits limited withdrawal prior to retirement and
reduces the total pension liabilities of the Government of India. The scheme is
structured in two tiers. A tier-1 account is a basic retirement pension account
available to all citizens from 1 May 2009.
It does not permit withdrawal of funds before retirement. A tier-2 account is a Prospective payment system (PPS) account that permits some withdrawal of pension prior to retirement under exceptional circumstances, usually related to the provision of health care.
It does not permit withdrawal of funds before retirement. A tier-2 account is a Prospective payment system (PPS) account that permits some withdrawal of pension prior to retirement under exceptional circumstances, usually related to the provision of health care.
Pension
plans provide financial security and stability during old age when people don't
have a regular source of income. Retirement plan ensures that people live with
pride and without compromising on their standard of living during advancing
years. Pension scheme gives an opportunity to invest and accumulate savings and
get lump sum amount as regular income through annuity plan on retirement.
According
to United Nations Population Division World's life expectancy is expected to
reach 75 years by 2050 from present level of 65 years. The better health and
sanitation conditions in India have increased the life span. As a result number
of post-retirement years increases. Thus, rising cost of living, inflation and
life expectancy make retirement planning essential part of today's life. To
provide social security to more citizens the Government of India has started
the National Pension System.
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