The National Pension Scheme or NPS has been much talked about. The idea behind pension plans is to provide financial security and stability to individuals during the later stages in life. At the juncture when people do not enjoy a regular and steady source of income, it becomes all the more significant to have a pension plan handy. A standard retirement plan serves to ensure that individuals can sustain their life standards without being dependent and without having to compromise on their standard of life during the years post retirement. A good pension scheme provides a chance to invest as per choice and create savings and later reap the benefits of a lump sum amount in the form of a regular income by means of an annuity plan at retirement.
If a person opens a National Pension System or NPS account, he/she is needed to keep contributing annually to that account. The NPS is viewed as a retirement product that requires you to keep the account locked for the period till you reach the age of 60 years. If you fail to do so, there are possible after effects of not contributing to the pension account. There are, of course, penalties to begin with. However, first and foremost, let us understand the relevance of NPS as a scheme, the guidelines that need to be followed and the penalty that follows if the contribution is stopped anytime before the lock in period.
The article on the National Pension Scheme on the respective website of the Government of India states that NPS was launched on the 1st of January, 2004, with the prime objective of providing retirement income to all citizens. NPS aims to institute pension reforms and inculcate a habit of saving for retirement among the citizens. Initially, the NPS was introduced for the new government recruits other than the armed forces recruits. However, from May 2009, it has been provided to all the citizens of India inclusive of the workers in the unorganised sector on a voluntary basis.
The important features of NPD include:
Allotting the subscriber a unique PRAN or Permanent Retirement Account Number
Using this unique PRAN number for all future transactions
Allowing the scheme holders to use the PRAN number from any location in India
The account for Tier I or the Retirement Account for NPS is a relatively long-term financial product that requires regular contributions from the person holding it every year