NPS (National Pension Scheme) Tier 2 Withdraw Money

The National Pension Scheme is a government-sponsored pension plan in India. It is a voluntary, post-retirement investment fund initiated by the Central Government. This scheme offers social security in the form of pension. It covers employees of all sectors, except those from the armed forces.Subscribers make voluntary contributions into their Pension Account to accumulate a post-retirement corpus, for which they receive a tax deduction under the Income Tax Act.

NPS provides access to two types of personal accounts -

• Tier-I Account: default account meant for post-retirement savings
• Tier-II Account: additional account meant for independent non-retirement related savings

The NPS Tier-II Account is an optional facility provided to NPS Tier 1 accountholders. Therefore, it is not compulsory to open a Tier 2 Account to invest in NPS and can be opened at the subscriber’s discretion. However, it is mandatory to have the primary Tier 1 account to open a Tier 2 account.The NPS Tier-II Account has numerous benefits like quick transfer of money from to the Tier-I Account, no annual maintenance charges, etc. Moreover, unlike a Tier-I Account, funds in a Tier-II are not tied-up with a lock-in period and can be withdrawn at any time. However, there is a three-year lock-in period for Tier-II accountholders who are government employees looking to avail a tax deduction on their investments.

There is no fixed rate of interest offered on Tier 2. Your money will be invested in 4 asset classes- equities, government bonds, alternative assets, and corporate bonds. You can decide how to allocate your money between these classes. However, there are a few limits, such as you can’t invest more than 75% of your money in equities. Furthermore, you can pick from 8 NPS fund managers. You can change your selection once in a year.

There are two ways of opening an NPS Tier 2 Account- Online and Offline.

Online Method-

• Visit the eNPS website (https://enps.nsdl.com/eNPS/NationalPensionSystem.html)
• Click on the ‘National Pension System’
• After that, a pop-up will appear. You need to click ‘Tier-II Activation’
• You’ll be redirected to a new page. On that page, you’ll need to enter your Permanent Retirement Account Number (PRAN), PAN details, date of birth, and the captcha
• After that, click on ‘Verify PRAN’
• The PRAN details will be verified with your Tier 1 account. Once the details are verified, the Tier 2 account will be activated.

Offline Method-

• You’ll need to visit your nearest NPS Point-of-Presence (PoP). Generally, it is the branch of your bank.

Government employees can avail a tax deduction under Section 80C. However, this tax deduction isn’t allowed for private sector employees.

There is no minimum or maximum yearly contribution to Tier 2.

NPS Tier-II Account offers liquidity in the form of easy redemption of funds at any point of time. Money lying in a Tier II Account can be withdrawn in the following way:

1. The accountholder must submit a duly filled UOS-S12 form at the nearest Points of Presence-Service Providers (POP-SP)
2. The POP will initiate the withdrawal request on behalf of the subscriber
3. Within T+3 days, that is, within three days after the day of form submission, the funds shall be transferred from the trustee’s bank account to the subscriber’s registered bank account.
4. The redemption amount shall depend on the amount of investment made and the applicable NAV at the time of withdrawal.

The accountholder can also make a withdrawal request online through their NPS Account log-in I.D. However, such applications need to be verified and authorized by the associated POP.

There is no lock-in period for investing in Tier 2 account. Investors can withdraw their money at any time. However, there is a lock-in period of 3 years for government employees who want to claim a tax deduction by investing in Tier 2.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.