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How to open an NPS Tier 2 account

Updated on: Jun 18th, 2024

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22 min read

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The National Pension Scheme, regulated by PFRDA, is a pension program and a social security initiative by the Central Government. This scheme is open to all Indian citizens on a voluntary basis. Everyone registering under NPS will have a Tier 1 account by default, but citizens can voluntarily opt for an NPS Tier II account.

Let us understand Tier II account in detail under the following topics:

About Tier II Account

Tier I account is the default account that gets opened when you open an NPS account. Tier II, on the other hand, is a voluntary account. When you invest here, it gets invested in different funds – similar to a mutual fund. There is no lock-in period, which means the account holder can withdraw the money at any time. The Tier II account is useful for those who want to make additional contributions to existing NPS and build a huge corpus towards retirement.

You also have an option to choose the category of funds where investments can be made. However, only 50% of the amount can be invested in equity funds. If you don’t choose, the fund automatically selects instruments based on your income, age and risk profile.

How to Open an NPS Tier II Account

Offline:

Any person (subscriber), who has an active Tier I account can apply for a Tier II account.

The person has to follow the following steps to apply offline:

  • The Tier II account has to be opened through the “Subscriber’s POP-SP”.
  • The applicant needs to download the Annexure 1: Tier II Details form and send it duly filled to the POP-SP. This form is under the ‘Subscriber Registration’ section.
  • Also, you must provide your bank account details to open a Tier II account because any withdrawals will be directly transferred to your bank account.

Online:

Let us see how it is done online :

Step 1: Visit the electronic National Pension system (eNPS). Click on “Tier II activation” tab.

NPS Tier II

Here, you can also view this in Hindi or English language.

Step 2: After clicking on Tier II activation, a window opens asking for details like Permanent Retirement Account Number (PRAN), Date of Birth, and PAN. Click on ‘Verify PRAN’ to receive an OTP on your registered mobile number.

NPS Tier II

Step 3: Enter the received OTP in the space provided and click on ‘Continue’.

Step 4: Fill in your bank account details and click on ‘Validate Aadhaar’.

Step 5: An acknowledgement number will be displayed on the screen. Note down the number and click on ‘OK’.

Step 6: Now, choose a Pension Fund Manager (PFM) and specify the investment option you want, e.g., Auto or Active. Click on ‘Save and Proceed’.

Step 7: Enter the nominee details and click on ‘Save and Proceed’.

Step 8: Upload the scanned copy of the PAN card and a cancelled cheque. Once the documents are ready, click on ‘Upload’.

Step 9: Make the payment towards the NPS Tier-II account. Note that the minimum amount you can invest in the account is Rs.1,000.

Step 10: A receipt will be issued for the payment received.

Step 11: E-sign the application using your Aadhaar number. An OTP will be sent to your registered mobile number.

Step 12: Enter the received OTP and submit.

Step 13: After successfully e-signing the application, you must download it, print it, put your signature on the printed form, and send it to NSDL’s head office in Mumbai through a registered post.

Expected Returns From NPS Tier II Account Schemes

The return rates given below were updated as on 07 June 2024.

NPS Tier II Account Scheme E

Pension Fund

NAV

Returns

1 Year

Returns

3 Years

Returns

5 Years

Returns

7 Years

Returns

10 Years

Returns

Inception

Aditya Birla Sun Life Pension Management Ltd.

26.8538

31.85%

17.32%

17.10%

15.04%

NA

14.96%

Axis Pension Fund Management Limited

13.8524

31.66%

NA

NA

NA

NA

22.13%

HDFC Pension Management Co. Ltd.

43.3417

31.93%

17.23%

17.29%

15.22%

13.95%

14.46%

ICICI Pru. Pension Fund Mgmt Co. Ltd.

53.9109

34.49%

18.41%

17.60%

15.30%

13.68%

12.35%

Kotak Mahindra Pension Fund Ltd.

54.9993

33.48%

18.34%

17.44%

14.96%

13.58%

12.48%

LIC Pension Fund Ltd.

35.2485

30.33%

17.55%

16.63%

14.12%

12.29%

12.34%

Max Life Pension Fund Management Limited

14.3489

32.16%

NA

NA

NA

NA

23.11%

SBI Pension Funds Pvt. Ltd

50.505

30.17%

16.83%

16.04%

14.19%

13.03%

11.82%

Tata Pension Management Pvt. Ltd.

14.8856

38.50%

NA

NA

NA

NA

24.69%

UTI Retirement Solutions Ltd.

53.8345

33.06%

17.26%

16.99%

15.03%

13.83%

12.32%

DSP Pension Fund Managers Private Limited

10.8817

NA

NA

NA

NA

NA

8.82%

NPS Tier II Scheme – C

Pension Fund

NAV

Returns

1 Year

Returns

3 Years

Returns

5 Years

Returns

7 Years

Returns

10 Years

Returns

Inception

Aditya Birla Sun Life Pension Management Ltd.

16.9763

7.01%

5.98%

7.78%

7.78%

NA

7.76%

Axis Pension Fund Management Limited

11.0744

6.35%

NA

NA

NA

NA

6.46%

HDFC Pension Management Co. Ltd.

24.409

7.33%

5.89%

7.83%

7.73%

8.50%

8.57%

ICICI Pru. Pension Fund Mgmt Co. Ltd.

36.4643

6.92%

5.70%

7.45%

7.45%

8.73%

9.35%

Kotak Mahindra Pension Fund Ltd.

32.9418

6.87%

5.47%

7.24%

7.13%

8.38%

8.58%

LIC Pension Fund Ltd.

24.2122

6.68%

5.61%

8.03%

7.59%

8.56%

8.51%

Max Life Pension Fund Management Limited

11.3005

8.07%

NA

NA

NA

NA

7.29%

SBI Pension Funds Pvt. Ltd

35.3381

6.82%

5.34%

7.17%

7.20%

8.41%

9.10%

Tata Pension Management Pvt. Ltd.

11.3144

6.94%

NA

NA

NA

NA

7.09%

UTI Retirement Solutions Ltd.

33.468

6.69%

5.55%

7.29%

7.23%

8.36%

8.69%

DSP Pension Fund Managers Private Limited

10.285

NA

NA

NA

NA

NA

2.85%

NPS Tier II Scheme – G

Pension Fund

NAV

Returns

1 Year

Returns

3 Years

Returns

5 Years

Returns

7 Years

Returns

10 Years

Returns

Inception

Aditya Birla Sun Life Pension Management Ltd.

16.5143

7.55%

6.32%

7.57%

7.22%

NA

7.34%

Axis Pension Fund Management Limited

11.3345

7.35%

NA

NA

NA

NA

7.99%

HDFC Pension Management Co. Ltd.

25.9567

7.92%

6.07%

7.50%

7.50%

8.78%

9.18%

ICICI Pru. Pension Fund Mgmt Co. Ltd.

32.7875

7.30%

6.06%

7.46%

7.48%

8.85%

8.57%

Kotak Mahindra Pension Fund Ltd.

31.6439

7.54%

6.20%

7.41%

7.30%

8.75%

8.27%

LIC Pension Fund Ltd.

28.0911

7.51%

6.18%

7.65%

8.28%

9.44%

10.01%

Max Life Pension Fund Management Limited

11.3519

7.90%

NA

NA

NA

NA

7.57%

SBI Pension Funds Pvt. Ltd

35.1921

7.92%

6.13%

7.50%

7.47%

8.88%

9.07%

Tata Pension Management Pvt. Ltd.

11.6351

7.45%

NA

NA

NA

NA

8.76%

UTI Retirement Solutions Ltd.

33.9093

7.39%

6.22%

7.37%

7.30%

8.68%

8.79%

DSP Pension Fund Managers Private Limited

10.3192

NA

NA

NA

NA

NA

3.19%

 

Eligibility Criteria to Open a Tier II Account

This scheme is open to all Indian citizens on a voluntary basis. Everyone registering under NPS must have a Tier I account by default, i.e., PRAN must be already provided. Citizens can voluntarily opt for an NPS Tier II account.

Here are the eligibility criteria for Tier I account for your reference:

  • All citizens of India whether residing in India or not can open the account.
  • Age of the applicant must be between 18 years and 60 years. 

Further, you can also open a Tier-I and Tier-II accounts simultaneously.

How to Withdraw and Close a Tier II Account

Exit/withdrawal from the NPS account means closing the pension account and receiving the account balance in one form or another. As per PFRDA (Exists and Withdrawals under NPS) Regulations of 2015, the reason for an exit must be one of the following:

  • Normal Superannuation:

In this case, 40% of the account balance must be used to purchase an Annuity that provides a monthly pension to the subscriber and the balance is paid in a lump sum. If the total corpus in the account is less than or equal to Rs.2 lakh as on the date of retirement, the subscriber can make a complete withdrawal.

  • Death:

A minimum of 80% of the pension account balance must be used to purchase an annuity that provides a monthly pension to the spouse and the balance amount shall be paid as a lump sum to the nominee/legal heir. If the total corpus in the account is less than or equal to Rs.2 lakh as on the date of the death of the subscriber (government sector employee), the nominee/legal heir will have the right to choose a complete withdrawal.

  • Premature Exit:

A minimum of 80% of the pension account balance must be used to purchase an annuity that provides a monthly pension to the subscriber and the balance amount shall be paid as a lump sum to the subscriber. If the total corpus in the account is less than or equal to Rs.1 lakh as on the date of resignation, the subscriber will have the right to make a complete withdrawal.

In the case of withdrawals from NPS Tier II Account offline:

Step 1: Submit a duly filled UOS-S12 form to the associated Points of Presence – Service Provider (POP-SP).

Step 2: The POP-SP will initiate processing the application.

Step 3: Over the next three days, the funds shall be transferred from the Trustee’s Bank to the subscriber’s bank account that is registered under the CRA system.

The withdrawal process can also be carried out online:

Step 1: Enter the User ID and IPIN on the CRA system within a period of 6 months before the age of superannuation/vesting date opted.

Step 2: Provide details, such as lump sum percentage of withdrawal, annuity percentage share details, annuity service provider details, bank details, nomination details, and others.

Benefits to NPS Tier II Account

  • Flexible withdrawals are allowed.
  • No exit load is applicable.
  • No annual maintenance charges.
  • Transfer funds conveniently from Tier II account to Tier I account as and when required.
  • No minimum balance requirement.
  • Assign a nominee to the account who can receive the account proceeds.

Tax Implications of Tier II Account

Deposits made in the NPS Tier I accounts are eligible for an income tax deduction under Section 80C of the Income Tax Act for employees. On the other hand, no income tax deduction is offered on NPS Tier II deposits and the gains in the NPS Tier 2 are taxable at the respective slab rates.

How to Login to your NPS Account for the first time?

Step 1: In order to log into your NPS account, you must have a 12-digit Permanent Retirement Account Number (PRAN). Submit the necessary documentation on the NSDL website or at the Point of Presence (POP) service providers to avail PRAN.

Step 2: Visit the eNPS login page https://enps.nsdl.com/eNPS/NationalPensionSystem.html.

Step 3: If you are a first-time visitor, click on the ‘Click here to generate or reset the password if you are a first time user’ option at the bottom of the page.

NPS Tier II

Step 4: Enter PRAN, date of birth, and captcha to generate OTP and click on the ‘Submit’ button.

NPS Tier II

Step 5: An OTP will be sent to your registered mobile number. Once you enter this OTP on the screen, your password will be confirmed.

Step 6: Now go back to the login screen and enter your PRAN, password, and captcha. Click on the ‘Login’ button.

Step 7: You will be redirected to the home page of your account.

What is the User ID for NPS Login?

Your Permanent Retirement Account Number (PRAN) that is offered on registration for the NPS account will be your user ID to login to the eNPS-NSDL website.

 
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Frequently Asked Questions

Can I exit NPS before attaining the age of 60 years?

Yes. You can exit before the age of 60 years provided you annuitize atleast 80% of the pension corpus.

How many times can I make contributions to NPS during the year?

There is no limit on the number of times you can make contributions.

Who can operate a Tier-II account?

Tier-II account can be operated by anyone who has a Tier-I account.

Will I get tax benefits investing in Tier-II account?

No. There are no specific tax benefits for investing in a Tier-II account. You will be taxed according to your marginal tax rate

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