The National Pension System (NPS) is a retirement savings scheme which enables investors to contribute regularly to a pension account. Here, investments can be made in equity, government securities, corporate bonds, and alternate investments in various proportions based on the investor’s risk appetite. At retirement/ on maturity/ superannuation, one can withdraw a portion of this corpus, whereas the remainder will have to be compulsorily invested in an annuity product for regular income. Originally launched for government employees, the scheme is open to all citizens. In recent times, the Pension Fund Regulatory and Development Authority (PFRDA) have announced several small changes in operational and other aspects for NPS subscribers and pensioners. Here’s what you should know.

Relaxation in equity allocation

To invest in NPS, there are two types of accounts available -Tier I and Tier II. A Tier II account can be opened only if you have an active Tier I account. Under both accounts, one can either opt for asset class allocation actively on their own (keeping in mind certain restrictions), or go for automatic allocation. The PFRDA circular dated October 20, 2022, has announced some changes with respect to equity exposure. Until now, under the active choice, subscribers could allocate up to 75 per cent of their funds to equity in a Tier-I account. On crossing the age of 51, the allocation limit is gradually reduced by 2.5 per cent each year, meaning 72.5 per cent when one crosses 51, 70 per cent after crossing 52 and so on. From 60 years onwards, the limit remains 50 per cent. However, now, active choice subscribers can continue to allocate up to 75 per cent of their funds in equity even after crossing 51 years of age, without any gradual reduction until 60. Also, in the Tier II account, one can allocate up to 100 per cent in equity, the limit for which was 75 per cent earlier.

Account opening using driving licence details

To open an NPS account online, one needs to go to the e-NPS website. Then he/ she needs to register with Aaadhar and fill personal details, nomination and bank details, after which a Permanent Retirement Allotment Number (PRAN) is generated. A photograph and signature also have to be submitted. According to the PFRDA circular dated October 19, 2022, one can now open an NPS account using a driving licence through the Digi Locker too. Here, on the e-NPS website registration page, you can select the option ‘Document with DigiLocker’ and choose driving licence under the same. On doing this, your demographic information and photo will be automatically populated, after which you can provide PAN, bank details, scheme and nomination details.

Unified form for exit and annuity sign-up

Once the subscriber attains the age of 60 or on superannuation, he/ she can either continue contributing till 75 years of age or can exit from the same. Here, the PFRDA and insurance regulator IRDAI have made some changes pertaining to withdrawal and exit process. Till now, while exiting, NPS retirees had to submit an exhaustive form and another proposal form to insurance companies to sign up for the compulsory annuity. However, according to an IRDAI circular dated September 23, 2022, the exit form for NPS will henceforth be treated as a proposal form for purchasing annuity. The reduced paperwork will ease the process for senior citizens. Further, the timelines for withdrawal have been reduced from T+4 days to T+2 days, where T is the day of authorisation of withdrawal request.

UPI contributions in, credit cards partially out

Changes related to payment of NPS contributions have also been announced. Prior to August 2022, NPS subscribers could deposit their voluntary contributions under D-Remit into Tier I and Tier II accounts through net banking by using IMPS, NEFT and RTGS only. D-Remit is an electronic system through which contributions can be transferred from the subscriber’s bank account to the Trustee Bank directly, so that you can get the NAV of the same for your NPS investment. However, now one can also pay contributions through UPI via D-Remit, the handle for which is PFRDA.15digitVirtualAccount@axisbank. Here, the contributions received before 9:30 am will be invested on the same day, else the contribution will be considered for investment on the next day. Further, credit cards can’t be used to make contributions in the Tier-II account (allowed earlier), while one can continue to make contributions to Tier-I accounts through credit card.

Changes in nominations

In the PFRDA circular dated August 25, 2022, changes pertaining to the process flow of e-nomination for government and corporate sector subscribers has also been announced. PFRDA introduced the e-nomination facility in 2020 to digitalise the nomination process. Under the revised process flow, after the subscriber initiates an e-nomination or makes changes in nomination, the nodal office would have the option to either reject or accept the request. In case no action is initiated by the nodal office within 30 days of the request, it would get accepted in the CRA (Central Recordkeeping Agency) system. Further PFRDA has put out a clarification pertaining to processing death claims, where the nomination is changed post death of subscribers. Here, any changes made in the nomination by anyone using the deceased subscriber’s login credentials will be treated as invalid. In case of invalid nominations, the eligible corpus must be paid to the legal heirs.