National Pension System (NPS) – Complete Guide from Opening to Closure (2025)
Planning for retirement is no longer optional in today’s uncertain economic
environment. With rising life expectancy, inflation, and changing job patterns,
building a stable pension corpus is essential. The National Pension
System (NPS), backed by the Government of India, has emerged as one of
the most reliable and cost-effective long-term retirement solutions.
This detailed guide explains everything you need to know about NPS
— its start date, amendments, charges (CRA & POP), Auto Choice with
examples, and the latest list of Pension Fund Managers (PFMs).
What is National Pension System (NPS)?
The National Pension System (NPS) is a defined
contribution pension scheme regulated by the Pension Fund
Regulatory and Development Authority (PFRDA). Under NPS, you
contribute regularly during your working years and receive a pension after
retirement based on accumulated corpus and investment returns.
NPS is available to:
·
Salaried individuals
·
Self-employed professionals
·
Government & private sector employees
· NRIs (subject to conditions)
📅 Origin & Evolution of NPS (Start Date
& Amendments)
Timeline of NPS
·
23 August 2003 – Interim PFRDA
was established
·
22 December 2003 – NPS notified
by the Government
·
1 January 2004 – NPS
implemented for new Central Government employees
·
1 May 2009 – NPS opened for all
Indian citizens on a voluntary basis
·
Later Amendments:
o
Entry age expanded to 18–70 years
o
Introduction of Corporate NPS
o
Expansion of Auto Choice lifecycle funds
o
Inclusion of NRIs
o
Tier-II account flexibility
👉 Today, NPS is a core retirement planning
product for both salaried and self-employed individuals.
Types of NPS Accounts
1. Tier I Account (Mandatory Pension Account)
- Primary retirement account
- Withdrawal restrictions apply
- Tax benefits available
- Mandatory for pension benefits
2. Tier II Account (Voluntary Investment Account)
- Optional savings account
- No withdrawal restrictions
- No tax benefit (except specific
cases)
Who Can Open an NPS Account?
- Indian citizens (resident or
NRI)
- Age: 18 to 70 years
- Individual capacity only (not
HUF)
How to Open an NPS Account (Step-by-Step)
Mode 1: Online Account Opening
- Visit official NPS portal
- Choose the partner to proceed
(KFINTECH , CAMS , protean)
- Register using PAN
- Complete KYC verification
- Choose pension fund and
investment option
- Make initial contribution
- PRAN (Permanent Retirement Account Number) generated
Mode 2: Offline Account Opening
- Visit POP (Point of Presence)
like banks
- Fill CSRF-1 form
- Submit KYC documents
- Make initial contribution
- PRAN issued
Minimum Contribution Rules
Tier I Account
- Minimum contribution: ₹500
- Minimum annual contribution:
₹1,000
- Contribution frequency:
Flexible
Tier II Account
- Minimum contribution: ₹1,000
- No annual minimum requirement
Structure of NPS
NPS works through multiple regulated intermediaries:
|
Entity |
Full Form |
Role |
|
PFRDA |
Pension Fund Regulatory and Development Authority |
Regulator |
|
CRA |
Central Recordkeeping Agency |
Maintains subscriber records |
|
POP |
Point of Presence |
NPS service providers |
|
PFM |
Pension Fund Manager |
Invests your money |
|
- |
Safeguards subscriber interests |
💰 Charges in NPS (Detailed & Transparent)
One major reason NPS is popular is its very low cost structure.
1️⃣ POP Charges (Point of Presence)
POP is your service interface for registration, contributions, and changes.
POP Charges Breakdown
·
PRAN Registration:
o
Up to ₹400 (one-time, varies by
POP)
·
Contribution Processing Fee:
o
0.50% of contribution
o
Minimum ₹30, Maximum ₹25,000
·
Non-Financial Transaction:
o
₹30 per request
·
Annual Persistency Charges:
o
₹50 (₹1,000–₹2,999 contribution)
o
₹75 (₹3,000–₹6,000)
o
₹100 (Above ₹6,000)
📌 POP charges may vary slightly but
remain regulated by PFRDA.
2️⃣ CRA Charges (Central Record keeping Agency)
CRA manages your NPS account digitally.
|
Service |
Charges (Approx.) |
|
PRAN Generation |
₹39–₹40 |
|
Annual Maintenance |
₹57–₹69 |
|
Financial Transaction |
₹3.36–₹3.75 |
➡️ These charges are deducted by cancelling
small units, not paid separately.
3️⃣
Pension Fund Manager (PFM) Charges
PFMs manage your investment across asset classes.
PFM Fee Structure (As per AUM)
·
Up to ₹10,000 crore – 0.09%
·
₹10,001–₹50,000 crore – 0.06%
·
₹50,001–₹1,50,000 crore – 0.05%
·
Above ₹1,50,000 crore – 0.03%
✅ These are among the lowest fund management
fees in India.
4️⃣ Other Charges
· Custodian Charges: Very minimal
(e.g. 0.000000001770% p.a.)
·
NPS Trust Charges: ~ 0.003% of
AUM
👉 Overall, NPS is one of the cheapest
long-term investment products in India.
🔄 Auto Choice in NPS – Explained with Example
What is Auto Choice?
Auto Choice is a lifecycle-based investment option where
asset allocation changes automatically with age. It is ideal for investors who
do not want to actively manage investments.
Types of Auto Choice
|
Lifecycle
Option |
Risk Level |
Equity
Exposure |
|
Life Cycle 25 |
Low |
Very Low |
|
Life Cycle 50 |
Moderate |
Balanced |
|
Life Cycle 75 |
High |
Higher
Equity |
|
Aggressive Life Cycle |
Very High |
Maximum Equity at young age |
Example of Auto Choice
Suppose Rahul joins NPS at age 25 under Life Cycle
50 (Moderate):
·
At age 25: Higher equity exposure for growth
·
At age 40: Equity gradually reduces
·
By age 55: Majority investment shifts to debt
& government securities
👉 This automatic rebalancing reduces risk as
retirement approaches.
📈 Pension Fund Managers (PFMs) – Updated List
(2025)
As of now, there are around 10 active Pension Fund Managers
under NPS (earlier there were more; some exited).
Current Major PFMs
1. Aditya
Birla Sun Life Pension Management Ltd.
2. Axis
Pension Fund Management Ltd.
3. HDFC
Pension Management Co. Ltd.
4. ICICI
Prudential Pension Fund Management Co. Ltd.
5. Kotak
Mahindra Pension Fund Ltd.
6. LIC
Pension Fund Ltd.
7. SBI
Pension Funds Pvt. Ltd.
8. Tata
Pension Management Pvt. Ltd.
9. UTI
Retirement Solutions Ltd.
10. (Other
approved PFMs as notified by PFRDA)
⚠️ Max Life Pension Fund exited in 2025;
subscriber corpus was transferred as per PFRDA guidelines.
Tax Benefits of NPS
1.
Section 80CCD(1)
- Up to 10% of salary
(salaried)
- Up to 20% of gross income
(self-employed)
- Included in 80C limit
2.
Section 80CCD(1B)
- Additional deduction of ₹50,000
- Over and above 80C limit
3.
Section 80CCD(2) – Employer Contribution
- Deduction up to 10% of
salary (14% for government employees)
Allowed
after 3 years of account opening for:
- Higher education
- Marriage
- Medical treatment
- House purchase
Maximum
withdrawal: 25% of own contribution
Who Should Invest in NPS?
·
Salaried employees seeking extra tax
deduction
·
Self-employed individuals without EPF
·
Long-term investors focused on retirement
·
Investors wanting low-cost disciplined
investing
Pros & Cons of NPS
✅ Advantages
·
Lowest expense ratio
·
Government regulated
·
Tax-efficient
·
Auto choice flexibility
·
Market-linked growth
❌ Limitations
·
Partial liquidity
·
Mandatory annuity on exit
·
Long lock-in till retirement
Final Verdict
The National Pension System (NPS) is an excellent
retirement planning tool for Indian investors who want discipline, low
cost, tax efficiency, and long-term wealth creation. With flexible
investment choices, Auto Choice lifecycle funds, and multiple Pension Fund
Managers, NPS remains one of the most demanding and relevant retirement
products today.
FAQs
Is NPS safe?
Yes, NPS is regulated by PFRDA and managed by professional fund managers.
Can NRIs invest in NPS?
Yes, NRIs can invest subject to eligibility.
Can I have multiple NPS accounts?
No, only one PRAN per individual is allowed.
Also you can read our Blog on - NPS
vs PPF vs ELSS – Best Tax Saving Investment in 2025.
Still confused? Drop your question in the comments or stay tuned for
our upcoming Blogs
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