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The National Pension System Lite (NPS Lite) was launched in 2010 to provide financial security for economically disadvantaged people. All eligible citizens from the unorganized sector can apply for this scheme. This article covers NPS Lite, its eligibility, benefits, and NPS Lite forms.

What is the National Pension Scheme NPS – Lite?

The National Pension System Lite (NPS Lite) was launched on April 1st 2010. Also known as NPS Swavalamban, this scheme aims to target the poor. NPS Lite helps secure the future of economically disadvantaged people. Any person who is in the age group of 18-60 years can join this scheme.

NSDL e-Governance Infrastructure Limited has been appointed as Central Recordkeeping Agency (CRA) for NPS – Lite by the Pension Fund Regulatory and Development Authority (PFRDA). NPS – Lite is designed in such a way it has a low-cost structure when compared to NPS. NPS Lite is based on a group servicing model. There are organizations called ‘Aggregators’ who will represent a group of low-income subscribers. These aggregators facilitate the registration, account maintenance, and transfer of pension contributions.

All Indians are eligible to invest in the NPS lite scheme. There is no restriction on the minimum amount of contribution every year. Moreover, the subscribers can make the contribution at any time of the year at their convenience.

Under NPS Lite, the asset allocation is such that 55% of the assets are an investment in government securities, 40% in corporate bonds and the rest in equity. Hence NPS Lite is more secure and has a higher probability of offering predictable and stable returns. Also, one can use an NPS calculator to estimate returns from NPS schemes. Scripbox’s NPS calculator is one such tool that estimates the probable returns from NPS schemes.

Upon maturity, the subscriber can withdraw a maximum of 60% of the accumulated corpus in lumpsum. This amount is entirely tax-free. Furthermore, the subscriber has to use a minimum of 40% of the accumulated corpus for purchasing an annuity scheme.

Who is eligible for the national pension scheme NPS- Lite?

NPS Lite Scheme is aimed to secure the financial future of people in low-income groups. Following is the eligibility criteria for the scheme:

  • All citizens of India between the age of 18 years to 60 years.
  • The subscriber has to be from an unorganized sector. A person belongs to the unorganized sector if they are not employed by the Central or state government or any other autonomous body and is not covered under any social security scheme.
  • The scheme applies to all people in the unorganized sector. And the benefit of central government contribution (INR 1,000) is available only to individuals who have their NPS contribution in the range of INR 1,000-INR 12,000 for both Tier I and Tier II accounts together. The subscriber also has to contribute a minimum of INR 1,000 per annum to the Tier I account. And the central government will contribute a minimum of INR 1,000 in Tier I and Tier II accounts combined per annum.

Benefits of NPS- Lite

Following are the benefits of the scheme:

  • The scheme is open to all citizens of India in the unorganized sector in the age group of 18-60 years.
  • Opening an NPS Lite account is easy and simple with the help of an Aggregator.
  • Investment in the NPS Lite scheme is considered as safe as the Pension Fund Regulatory and Development Authority PFRDA regulates it. Also, NPS Trust regularly monitors and tracks the funds’ performance.
  • Investing in NPS Lite is very economical. The scheme is based on a low-cost structure and has no restrictions on the minimum contribution.

Withdrawal from NPS – Lite

A subscriber can exit normally at the age of 60 from the NPS Swavalamban scheme. However, the scheme also allows early exit in certain conditions. Following are the withdrawal rules for the scheme:

Exit at the age of 60

At the time of exit at the age of 60, the subscriber should use at least 40% of the corpus to purchase an annuity scheme. The subscriber will provide a bank account and other withdrawal details to the aggregator. The aggregator will upload the same in the Central Recordkeeping Agency CRA system for execution. Also, at the time of exit, the aim is to offer a minimum of INR 1,000 per annum as a pension. If 40% of the corpus doesn’t fulfil this requirement, then a larger amount of the corpus is used to buy the annuity scheme.

Exit before the age of 60

The subscriber has to use a minimum of 80% of the amount for purchasing an annuity. The rest 20% can be withdrawn.

Withdrawal due to death of the subscriber

In the event of the subscriber’s unfortunate demise, the legal heirs or the nominee will approach the aggregator with necessary documents like the death certificate and ID proof. The aggregator will then facilitate the transfer of the entire corpus to the nominee or legal heir’s account.

How to fill NPS – Lite Form?

Following are the different forms for NPS – Lite scheme.

NL-N1 NPS Lite Oversight Office

NL-N1 NPS Lite Oversight Office form is used to register the NPS Lite oversight office of the aggregator. The aggregator has to fill in the following details in the form:

Name, address, contact details, and bank details like bank name, account number, address and IFSC code. The aggregator also has to fill in the authorized contact person details. Moreover, you also need to choose the pension fund manager. At the end of the form, the authorized person must sign along with the date and place.

NL-N2 NPS Lite Account Office

NL-N2 NPS Lite Account Office form is used to register the NPS Lite account office of the aggregator. The aggregator has to fill in the following details in the form:

Name, address, contact details, and bank details like bank name, account number, address and IFSC code. The aggregator also has to fill in the authorized contact person details. Moreover, you have to sign a declaration. At the end of the form, the authorized person must sign along with the date and place.

NL-N3 NPS Lite Collection Centre

NL-N3 NPS Lite collection centre form is used for registration of the NPS Lite collection centre aggregator.  The aggregator has to fill in the following details in the form:

Name, address, contact details like Email ID, phone number, and authorized person contact details. You also need to sign at the end of the form along with the place and date.

Annexure NE-5: Bank Details Update Form

The NE-5 bank details update form is used by the Nodal Office (NL-OO/NL-AO) to update or modify the bank details in the CRA system. In this form, the Nodal Office must fill in the bank account number, beneficiary name, bank name, branch name, and address. You also have to fill the IFSC Code and MICR Code. Furthermore, a proof of the bank account has to be attached as proof. A bank statement, cancelled cheque, bank certificate, or a bank passbook can be used as proof. At the end of the form, the authorized person has to sign the application and the date and place.