Retirement is a phase when you don’t have a regular source of income and that is why a retirement corpus becomes necessary. When you are working and earning an income, you can save in a disciplined manner to build up a substantial retirement corpus which would fund your retirement easily. There are various investment avenues which even help you in planning and building a retirement corpus. National Pension Scheme is one such investment avenue, launched by the Government of India, which is dedicated to helping create a retirement corpus for you and fund your retirement.

Let’s understand what this scheme is all about –

What is the National Pension Scheme?

The National Pension Scheme is a market-linked savings scheme which gives you good returns and builds up a decent corpus for retirement. Contribution to the scheme can be made when you are earning an income. After you retire, the scheme would be available for redemption. On redemption, you would be able to withdraw partly from the scheme in a lump sum and the remaining amount would pay you annuities for your entire life. The National Pension Scheme, therefore, not only helps you in creating a corpus for retirement, but it also promises lifelong income after you retire.

Where to open a National Pension Scheme account?

Investment in National Pension Scheme can be done from a bank which is authorised to offer the scheme to its customers. ICICI Bank is one such authorised bank which is registered with the Pension Fund Regulatory and Development Authority (PFRDA) to offer NPS investments. So, if you are a customer of ICICI Bank, you can invest in the NPS scheme.

National Pension Scheme ICICI Bank – Process of investing

ICICI Bank is an authorised Point of Presence (POP) through which NPS investments are possible. To invest in NPS through ICICI, you have two options – investing offline or investing online. Here are the processes explained –

  1. Offline investing in ICICI Bank NPS Account
    You would have to visit the branch of ICICI which serves as a Point of Presence Service Provider (POP-SP). The list of branches which act as POP-SP can be found on the link https://www.icicibank.com/managed-assets/docs/personal/accounts-and-deposits/pension-schemes/new-pension-system/NPS-branches-list.pdf. At the branch, you would have to fill up an application form and submit your KYC documents to open the account.
  2. Online investing in ICICI Bank NPS Account
    If you prefer to start an NPS account online, ICICI Bank offers you an online investment facility as well. You can start investing in NPS through the eNPS portal offered by the Government. You can invest online if your ICICI Bank account is linked to your PAN Card. Moreover, you should have registered for net banking facility offered by ICICI to open NPS account online. The process of opening the account is as follows –

    1. Go to the website https://enps.nsdl.com/eNPS/NationalPensionSystem.html, choose ‘National Pension Scheme’
    2. Choose ‘Registration’ and register yourself
    3. You would have to enter your details in the registration form. These details include your PAN card number, name, address, age, phone number, email ID, etc.
    4. An OTP would be sent to the mobile number which is registered with your PAN card
    5. You would have to enter the OTP to complete the verification process
    6. Choose the investment account that you want. There are two investment accounts – Tier I and Tier II. You would have to choose Tier I account and then, if you want, you can also choose Tier II account for investment
    7. Choose a pension fund manager. There are 8 pension fund management houses authorised by PFRDA to manage the assets of the NPS scheme. You can choose any manager as per your requirement
    8. Choose your investment strategy from Active Choice or Auto Choice
    9. Enter in the details of the nominee/nominees
    10. Upload all your KYC documents which are required for opening the NPS account
    11. Make an online contribution to the NPS account to open it and complete the registration process
    12. After the payment is done, the registration form will be displayed containing your details. Save the form online for future reference
    13. The Permanent Retirement Account Number (PRAN) would be generated after the registration and contribution to the scheme is done
    14. You should download the forms, attach your photograph on the form and the KYC documents and mail this form to the Central Recordkeeping Agency (CRA) for completing the account opening process. The form should be sent within 90 days of opening the online account.

Documents required to open an NPS Account with ICICI Bank

The documents required for opening the account are as follows –

  1. Proof of identity like PAN Card, passport, etc.
  2. Proof of age like voter’s ID card, passport, PAN card, etc.
  3. Proof of address like driving license, utility bills, passport, etc.

National Pension Scheme ICICI Bank– Who can invest?

Resident Indians, as well as NRIs, can invest in the NPS scheme offered by ICICI Bank provided they are aged between 18 and 60 years. For NRIs, however, if there is a change in their citizenship after opening the account, the scheme would be terminated.

National Pension Scheme ICICI Bank– How does the scheme work?

Now that you know how to invest in the NPS account, let’s understand how the NPS scheme works. Firstly, there are two types of NPS accounts for investment. These are as follows –

  1. Tier I Account
    This is a compulsory account which you would have to open if you want to invest in NPS. A minimum contribution of INR 500 is required in the account. Moreover, in one year, a minimum of INR 1000 should be deposited in the Tier I account. If you don’t deposit the minimum amount, the account would be frozen and you would have to pay a fine to unfreeze it.Tier I Account does not allow withdrawals before maturity. However, you can withdraw from the account under specified circumstances which include the following –

    1. Continuous unemployment for 60 days and above
    2. Marriage
    3. For medical contingencies
    4. For buying a home, etc.
  2. Tier II Account
    This is not compulsory. You can invest in Tier-II Account if you want but only if you have a Tier I Account. This is a flexible account which allows flexible investments and withdrawals. There are no limits on withdrawing from the Account. The minimum contribution to the account is INR 250.After you have chosen the account into which you want to invest, you would have to choose your investment strategy as per your risk appetite. NPS schemes allow you two types of strategies which are discussed below –

National Pension Scheme ICICI Bank– investment strategies

  1. NPS Account Active choice investmentIf you opt for Active Choice you control and manage your investments. There are different types of investment funds under this strategy which are as follows –
    FundsComposition of fund portfolio
    Asset Class AAlternate investment funds. Example – MBS, AIF, REITS, etc.
    Asset Class CFixed interest investments barring Government securities
    Asset Class EEquity stocks
    Asset Class GGovernment securities

    You can choose any one fund or a combination of multiple funds provided the following conditions are met –

    1. 100% of the investment cannot be done in Asset Class E because it has very high risks
    2. A maximum of 75% can be invested in Asset Class E. The remaining can be invested in Asset Class C and Asset Class G
    3. Investment in Asset Class A is optional. However, if chosen, the maximum investment which can be done is limited to 5%
    4. If Asset Class E is not chosen, you can invest in Asset Class C and Asset Class G in any ratio that you like

    Moreover, your investments would also be determined by your age. After you attain 50 years of age, your equity exposure would start reducing @ 2.5% per annum till the total exposure is limited to 50%. In your older ages, you cannot enjoy more than 50% investment in Asset Class E.

  2. NPS Account Auto choice investmentAs the name suggests, Auto Choice is an automated investment strategy where investments are done based on your age. There are three risk categories and you have to choose one category to determine the investment pattern.The categories are Aggressive, Moderate and Conservative. The investment pattern of each category is as follows –
    1. Aggressive category investmentAggressive Life Cycle Fund
      Age bracketAsset Class EAsset Class CAsset Class G
      Up to 35 years75%10%15%
    2. Moderate category investmentModerate Life Cycle Fund
      Age bracketAsset Class EAsset Class CAsset Class G
      Up to 35 years50%30%20%
    3. Conservative category investmentConservative Life Cycle Fund
      Age bracketAsset Class EAsset Class CAsset Class G
      Up to 35 years25%45%30%

      The above-mentioned pattern is for your initial investment. Then, with advancing age, equity investment reduces in all categories. The decrease in equity investment is compensated by increasing the investment in Asset Classes C and Asset Class G in pre-defined ratios.

      You are free to choose any investment strategy or investment fund. Switching is also allowed once every year wherein you can change the strategies from Active choice to Auto choice and vice-versa. Moreover, you can also switch between the investment funds.

    National Pension Scheme ICICI Bank– Withdrawals from the scheme

    Withdrawals from Tier I Account are allowed only on specific instances. Withdrawals from Tier II Account, however, can be done any time. You can withdraw from NPS investments partially or fully. In case of full withdrawals, 20% of the accumulated corpus can be withdrawn in a lump sum while the remaining 80% is mandatorily used to avail annuities.

    Partial withdrawals, on the other hand, are allowed from the third year of investing in NPS. Up to 25% of the corpus can be withdrawn at once. You can withdraw a maximum of three times over the tenure of the NPS scheme and there should be a gap of 5 years between each withdrawal

    National Pension Scheme ICICI Bank– Maturity of the scheme

    Maturity of the NPS investment happens after you attain 60 years of age. You can also postpone the maturity date by 10 years and receive the maturity proceeds when you attain 70 years of age.

    On maturity, 60% of the balance in your account can be taken in a lump sum. This amount would also be tax-free in your hands. The remaining 40% is then used to pay you annuities for your entire life. The NPS Scheme offers a range of annuity options which are as follows –

    • Uniform annuity payable throughout life
    • Uniform annuity payable for a guaranteed period of 5, 10 or 20 depending on you. On your survival till the end of the guaranteed period, the annuity would be continued till your lifetime
    • Uniform annuity payable throughout life and refund of the purchase price on death
    • An increasing amount of annuity payable for life wherein the annuity increases at 3% simple rate of interest
    • Uniform annuity payable throughout life. On the annuitant’s death, 50% of the amount of annuity is payable for as long as the spouse is alive
    • Uniform annuity payable throughout life. On the annuitant’s death, 100% of the amount of annuity is payable for as long as the spouse is alive
    • Uniform annuity payable throughout life. On the annuitant’s death, 100% of the amount of annuity is payable for as long as the spouse is alive. When the spouse dies, the purchase price would be refunded back to the nominee

    Among the available options, you can choose any annuity pay-out option that you like. The option that you select would determine the annuity rate.

    If the balance in the NPS account is less than INR 2 lakhs on maturity, no annuity payment would be made. In such cases, the balance in the NPS account is paid in a lump sum.

    So, understand what the NPS scheme is all about and how you can open an account through ICICI Bank. Invest in NPS and you can create a retirement corpus for yourself. Moreover, under Section 80 CCD (1B), the investments made in NPS account, up to INR 50,000, would be allowed as an additional tax deduction, over and above the deduction available under Section 80C of the Income Tax Act. Thus, through NPS investments, you can also save your tax liability.


FAQ’s

Yes, partial withdrawals made from Tier I Account would be completely tax-free in your hands.


Under the NPS scheme, the annuity payments that you receive would be fully taxable in your hands.


In case of death before maturity, the entire corpus of the scheme can be availed in a lump sum by the nominee. This benefit would also be tax-free in the hands of the nominee.