If you are employed under private sector, you may be contributing a part of your earnings into the Employees provident fund. There is also a public provident fund option that you can use to save your earnings for future. On May 1, 2009 Government of India has introduced the New pension scheme (NPS) where all citizens of India can contribute their savings for retirement purposes (tier 1).
Very recently, the Government has also made tier 2 available to public, which mainly differs from tier 1 in the respect of money withdrawal ability. While tier 1 didn’t have the option to withdraw your money, unless you have a serious reason, tier 2 gives you the ability to withdraw money at any time. So necessarily, the tier 1 is seen as a pension account and tier 2 can be seen as a savings account, but both still serve for retirement benefits.
But note that, an active tier 1 account will be required to open a tier 2 account.
Tier 2 scheme has the following features under its belt:
- No limits on the number of withdrawals made
- You have the option of appointing a nomination to your account
- This is a completely voluntary scheme in which the contributions can be made by POP or POP/SP (point of presence service providers)
- You can transfer the savings amount from tier 2 account to tier 1 account any time (but this is not reversible)
To open a Tier 2 account, you must mandatorily have a bank account, your PRAN card (permanent retirement account number) will act as an identification (KYC –Know your customer).
The minimum contribution to be made during the time of account opening is Rs.1000.
For each contribution made there after, the minimum amount should be Rs.250 and that should be made for at least 4 times in a year.
This means that you have to make a contribution of at least Rs.250 four times in a year to keep your account in good condition.
At the end of a financial year, the minimum balance in your account should be Rs.2000 and there is a penalty of Rs.100 if the said balance isn’t maintained or the number of contributions per year is less than 4.
You’ll have the choice of choosing from 6 different fund managements and 3 asset classes (E, C and G).
You can download the forms from here, to open a tier 2 account.