VR Logo

No Lock-in Pension

The PFRDA will not even set a minimum subscription amount limit

To make a success of the currently not-so-popular New Pension System (NPS), the government is unveiling new features, and creating new facilities. In short, it is doing everything it can to get people to subscribe, in a convoluted sort of way.

Amidst talk of the tediousness of the task of getting registered in the scheme due to lack of knowledge amongst bank staff and the hard task of locating a branch aside from various other reasons that are acting as a deterrent, the Pension Fund Regulatory and Development Authority (PFRDA) has decided on not fixing any minimum limit on investments which are made by individuals to a scheme of NPS in which the subscription money can be withdrawn at any point of time.

Scheduled to see the light of the day On December 1, this new two-tier scheme aims at helping subscribers to both invest without any lock-in and even take out money whenever they want to. As top PFRDA officials put it, the tier II scheme would provide the much needed flexibility to the subscriber and liquidity as there would not be any minimum or maximum limit to the annual subscription.

However, there is a catch to it all. It is a must for a subscriber to this scheme to have an active account in the tier I scheme as well. In the latter, the annual subscription is Rs 6,000 and one cannot withdraw money till the subscriber’s retirement.

And if that was not enough, one has to put in money for at least four times a year with a minimum investment of Rs 500 in the tier I scheme. The authority has gone ahead to have a central record-keeping agency which will charge Rs 350 for opening an account in the tier II scheme, the same levy as in tier I in an effort to minimise the cost to the subscribers.

Subscribers would not be spared from the transaction charges as they will be levied both by the points of presence (PoPs) and the record keeper which would come for Rs 20 and Rs 10 respectively. However, officials maintained that the minimum payment will however be determined by the transaction cost. A PoP will not accept subscriptions below the payout level of each transaction.