Under NPS, an exit is defined as closure of individual pension account of the subscriber.

National Pension System (NPS), a government-sponsored retirement planning instrument, gives the investor the option to set preferred allocation to different asset classes, such as government bonds, equity market instruments and corporate debt. In NPS account, subscriber can know the value of the investment on day to day basis, according to National Securities Depository (NSDL) website - npscra.nsdl.co.in. NSDL (National Securities Depository Limited) is the Central Recordkeeping Agency (CRA) for National Pension System (NPS). Each employee is identified by a unique number and has a separate Permanent Retirement Account Number (PRAN).

Given below are key things to know about National Pension System (NPS):

How to open NPS account

An NPS account can be opened by a citizen of 18-65 years of age in two modes: online and offline. The subscriber can either apply for an NPS account by visiting a Point of Presence (PoP), or do it online through the e-NPS website- enps.nsdl.com/eNPS, according to NSDL.

Types of NPS accounts

NPS offers two types of accounts: Tier 1 and Tier 2. Tier 1 NPS account is a pension account which doesn't allow withdrawals. On the other hand, Tier 2 NPS account - known as investment account - is a voluntary saving account associated with the PRAN. Tier II offers greater flexibility in terms of withdrawal, according to NSDL.

Exit/withdrawal rule of NPS

Under NPS, an exit is defined as closure of individual pension account of the subscriber. NPS also allows partial withdrawal from the mandatory Tier-I account under certain conditions, according to NSDL.

For withdrawal before attaining 60 years of age, at least 80 per cent of the accumulated pension wealth of the subscriber has to be utilized for purchase of an annuity, providing the monthly pension to the subscriber and the balance is paid as a lump sum to the subscriber, according to NSDL.

In case if the total accumulated corpus in the NPS account is less than Rs 2 lakh, the subscriber can opt for a 100 per cent lump sum withdrawal, upon attaining 60 years of age. In other cases, at least 40 per cent of the accumulated corpus needs to be utilized for purchase of an annuity scheme, providing a monthly pension to the subscriber. In this case, the remainder is paid as lump sum to the subscriber.

In case of death of the subscriber, the nominee gets the option to receive 100 per cent of the NPS corpus in lump sum. The nominee can also choose to continue with the NPS account, by subscribing to NPS individually after following due KYC (know your customer) procedure, according to NSDL.