State Bank of India (SBI) offers National Pension System (NPS) with an objective to provide social security to all citizens of India. According to SBI, NPS is a defined contribution pension system introduced by the Government of India as a part of pension sector reforms. It is administered and regulated by Pension Fund Regulatory and Development Authority (PFRDA). With SBI's NPS, an investor can save on tax, earn market returns and also secure old age, stated the country's largest lender on it's official Twitter handle- @TheOfficialSBI.
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Here are 10 things to know about SBI's National Pension System (NPS):
1. An NPS account can be opened by individuals between 18 and 65 years of age.
2. An NPS account can be maintained at a minimum contribution of Rs 6,000 a year.
3. NPS offers two types of accounts: Tier 1 and Tier 2. Subscribers must make a minimum contribution of Rs 1,000 per annum for the tier 1 account. For the tier-2 account of NPS, there is no minimum requirement of contribution, noted SBI on it's corporate website- bank.sbi.
4. The Tier 1 NPS account is strictly a pension account which doesn't allow withdrawals. The Tier 2 account - known as investment account - allows withdrawals.
5. The corpus stays locked-in till the age of 60 years in SBI's NPS account. Withdrawal before 60 is also allowed but in that case at least 80 per cent of the corpus ought to be allocated to annuity, which is a tax-free withdrawal., mentioned SBI.
6. NPS has no fixed rate of interest. The interest rate on NPS contribution is dependent on the pension fund manager (PFM) the account holder chooses.
7. NPS offers market-linked investment return with the option of making adjustments in portfolio.
8. Under NPS, the investor gets to decide where to put the money. That means the subscriber can decide his preferred weightage in asset classes such as equity funds and government securities.
9. Subscriber can also select a Pension Fund Manager (PFM) of their choice. Subscriber is allowed to change PFM once during a financial year.
10. Investment in NPS can be used to avail a tax benefit up to Rs. 2 lakh in a financial year under Sections 80CCD(1) and Section 80CCD(2) of the Income Tax Act. The Tier 1 NPS account offers tax benefits while the Tier 2 NPS account doesn't offer any such benefit, said SBI.
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