The National Pension System
The National Pension System (NPS) is a defined-contribution-based pension system launched by the Government of India with effect from 1 January 2004. Like most other developing countries, India did not have a universal social-security system to protect the elderly against economic deprivation. As a first step towards instituting pension reforms, the Government of India moved from a defined-benefit pension to a defined-contribution-based pension system. Apart from offering a wide gamut of investment options to employees, this scheme helps the Government of India to reduce its pension liabilities. Unlike existing pension fund of the Government of India that offered assured benefits, NPS has defined contribution and individuals can decide where to invest their money. The scheme is structured into two tiers:
- Tier-I account: This NPS account does not allow premature withdrawal and is available to all citizens from 1 May 2009.
- Tier-II account: This NPS account permits withdrawal for exceptional reasons only, prior to the retirement age.
The Pension Fund Regulatory & Development Authority
The Pension Fund Regulatory & Development Authority Act was passed on 19th September, 2013 and the same was notified on 1st February, 2014. PFRDA is regulating NPS, subscribed by employees of Govt. of India, State Governments and by employees of private institutions/organizations & unorganized sectors.
