In India, the Small Savings Scheme and the Public Provident Fund (PPF) scheme have been big hits ever since they were announced. And added to that, the National Pension Scheme (NPS) has also become one of the most popular investment plans in the country.  

A Post-retirement plan  

It is mandatory for every government employee to have an NPS account. But even private employees can have an account. NPS basically helps you have a plan after you retire. It is more of a way by which you can save up money for the future.

It gives you the funds you need to live a comfortable life after you retire. While you are still working, you invest a small portion of your monthly income into your NPD account. You can open such an account at any of the approved banks in the country.  

Now, after you’re done with your employment, you can relax and retire knowing that you don’t have to worry about having an income. Your NPS account will continue to give you the pay-outs of your investment.  

When the amount matures, you can withdraw up to 60% of it without paying tax on it. The remaining 40% of the funds will continue to remain in the account. This will be given to you in the form of monthly pension.   

For all this to happen, you need to open an account first. But when you open an NPS account, you should also know that there are several charges attached to it. Even making transactions can be charged.  

How to open an NPS account  

Many of the major lending banks in the country offer NPS accounts. These include banks such as ICICI, HDFC, Axis Bank, State Bank of India (SBI), and others.  

The Pension Fund Regulatory and Development Authority (PFRDA) of India allows you to open an NPS account both online and offline.  

If you want to open the account online, you can do so on the NSDL website. If you prefer to open the account offline, you can physically head over to a Point of Presence (PoP) and do it.  

A PoP could even be a bank. Check with a bank near you and find out if they will open such an account for you.  

Once you’ve found a bank with which you want to open this account, follow the steps given below to open it:  

  • Fill out the application form and submit it  
  • Submit your KYC forms (address proof, Aadhaar card, passport, PAN card, voter ID, etc.) and photograph  
  • Place the minimum required annual investment (Rs.500 or Rs.1,000)

Once you’ve done the above, your account will be opened.  

Once the bank opens your account, you will get a welcome kit. This will contain your PRAN card or Permanent Retirement Account Number along with all the other information you submitted with your application.  

The pack will also contain the TPIN (Telephone PIN) and the IPIN (Internet PIN). Both of these are passwords that you can use to access your account and make online transactions.  

And there’s something you need to always remember. Your PRAN card is absolutely vital when it comes to operating your NPS account. So, make sure that you take care of it well.  

Let’s now move on to the various fees and charges that are associated with an NPS account.  

Fees charged on your NPS account

Let’s look at the fees that are charged by some of the major banks.  

Registration and deposit charges:
  • You will be charged Rs.200 for registering your account with the bank. You will also be charged about 0.25% of the amount you deposit. This is subject to a minimum of Rs.20 and a maximum of Rs.25,000.  
  • Apart from the charges you have to pay on your initial deposit amount, some banks charge you for subsequent deposits as well.  
  • For example, SBI charges 0.25% of every subsequent amount you deposit, subject to a minimum of Rs.20 and a maximum of Rs.25,000.  
  • HDFC charges a fee of 0.10% of your subsequent transactions. This is subject to a maximum of Rs.10,000 and a minimum of Rs.10.  
  • A few other banks such as Axis Bank and ICICI Bank don’t charge any fee for the subsequent amounts your deposit into your account.  

If you make any non-financial transaction – one that doesn’t involve your own contribution, you have to pay Rs.20 per transaction.  

Apart from this, banks will also charge you a fee of Rs.50 per year to keep your account active.  

Your PRAN card can be used for your NPS account very similar to how you use a normal debit card or credit card.

HDFC is the only bank that charges you for using the PRAN card. These charges are as follows:  

  • Rs.40 for opening your PRAN.   
  • Rs.95 as annual maintenance fee.  
  • Rs.3.75 for every transaction that is made using your PRAN card.  

Other banks such as Axis Bank, ICICI Bank, and SBI don’t charge you for using the PRAN card. Bankbazaar provides all the information about PRAN card  and how to apply in online.

Does it make sense to invest in an NPS account?

All said and done, does it make sense to invest your money in such an account? Should you invest a bit of your monthly income in a government savings scheme or should you put it into something else?  

This comes down to how much return on investment (ROI) you want. It also depends on the kind of security you’re looking to get for the money you invest.  

Investing in an all-equity scheme may promise you high returns, in the range of 20% p.a. or even more. Sure, this does seem like a very attractive option, but keep in mind that you also have no security. If the market crashes, you lose your funds.  

The NPS account gives you a return ranging between 8% p.a. to 14% p.a. Half of your funds are invested in the equity market. This gives you a good chance to earn a good ROI. And even if the market does go down, you still have at least 50% of your funds secured.