The National Pension System (NPS) is a defined-contribution-based pension system launched by the Government of India with effect from 1 January 2004. Like most other developing countries, India did not have a universal social-security system to protect the elderly against economic deprivation. As a first step towards instituting pension reforms, the Government of India moved from a defined-benefit pension to a defined-contribution-based pension system. Apart from offering a wide gamut of investment options to employees, this scheme helps the Government of India to reduce its pension liabilities. Unlike existing pension fund of the Government of India that offered assured benefits, NPS has defined contribution and individuals can decide where to invest their money. The scheme is structured into two tiers:

 

• Tier-I account: This NPS account does not allow premature withdrawal and is available to all citizens from 1 May 2009.

• Tier-II account: This NPS account permits withdrawal for exceptional reasons only, prior to the retirement age.

 

Since 1 April 2008, the pension contributions of Central Government employees covered by the National Pension System (NPS) are being invested by professional Pension Fund Managers in line with investment guidelines of government applicable to non-Government Provident Funds. A majority of state governments have also shifted to the defined contribution based National Pension System from varying dates. Twenty-nine state/UT governments have notified the NPS for their new employees. Of these, five states have already signed agreements with the intermediaries of the NPS architecture appointed by Pension Fund Regulatory and Development Authority (PFRDA) for the implementation of the National Pension System. The other states are in the process of finalization of documentation.

 

Shri Hemant G Contractor is the present Chairman, Nagendra Bhatnagar is the present CEO and Dhirendra Swarup is one of the founders who played a key role in the implementation of the scheme.