and channelises that money in the investment funds of that person’s choice. As of now, there are three different fund options to opt from:
Equity Fund (It doesn’t allow you to put more than half of your money in this)
Corporate Bond Fund
Government Securities Fund
Rules to be followed
An amount of Rs. 6000 is set as the least value of the amount that has to be contributed every year. It is possible to deposit this amount in one go and also have the option of doing the same in instalments. However, instalments prove to be more expensive. Till the age of 60 of the scheme holder, this money remains invested. At the age of 60 years, one can withdraw up to 60 percent of the total collected corpus but one needs to buy an annuity, which is a pension product that pays in the form of a periodic income during one’s retirement days, with at least 40 percent of the corpus.
If the money has to be withdrawn before the age of 60 years, at least 80% of that money is required to be annuitised. However, certain partial withdrawals under the PFRDA Act 2013 are allowed under special circumstances. The notification for this is yet to come.
There is also a Tier-II account offered by the NPS that is completely flexible. The only dissimilarity is that it allows withdrawals. A minimum balance of Rs. 2,000 every year is required, however.
Penalty for not adhering to the Rules
If the required Rs. 6,000 is not deposited in instances of skipping the payment of that money or payment of a lesser value than that is made, the Pension Fund Regulatory and Development Authority (PFRDA) will be bound to freeze the account. No transactions will be allowed until one pays the bare minimum contribution with a penalty amount of Rs. 100 per year of defaulting contributions.
However, even if the account is frozen, the deposited money will remain invested until the fund value does not decrease to zero. The account will be closed and you will have to further reactivate it.
A penalty of Rs. 100 has to be paid, even in the case of the Tier-II Account in case the yearly contribution is skipped or the minimum balance of Rs. 2,000 is not maintained.