NRIs can take advantage of Indian National Pension System

Friday 2 March 2018 1:52 AM UTC

By Jeevan Vipinchandran

Indians living abroad may find it comforting to know that India’s National Pension System has been available for them to use since October 2015. There are an estimated 30 million people of Indian origin living abroad.

Some of them, especially those men and women of the older generation, may be looking to settle back down in India over the next few years.

For those people who do not have property or investments in India there is hope for a source of income in old age, as India’s growing government pension pool can be used for that purpose.

The National Pension System works by pooling funds from government bonds, corporate bills and shares to provide a modern pension fund. This fund pool is looked after by professional managers from a financial background.

Indian government bond markets have been growing over the past few years, as more and more foreigners have begun to show more demand for them. This also reflects the rapidly growing Indian economy.

How can NRIs take advantage of this pension system? It is important to note that OCIs and PIOs are not eligible for this pension, as they do not have Indian citizenship, whereas NRIs do.

Any non-resident Indian between 18 and 60 years of age is eligible to apply for this pension scheme. The person applying needs to have an NRO or NRE account. Furthermore he or she cannot get anyone else to open the scheme, as the use power of attorney (using another individual to open the

account) is not allowed.

You can open a National Pension Scheme account through any authorised ‘Point of Presence’. This is any centre in India which has the authority to open an NPS account on your behalf.

Typically almost any Indian bank can act as a Point of Presence. You will need to provide the following details and documents:

 Overseas address and contact details – the country that you are currently living in

 Permanent Indian address

 Completed registration form

 Copy of passport

 Proof of address, if it’s different to the address on your passport.

There are two types of NPS account that you can apply or, Active Choice and Auto Choice. Active Choice is where you actively manage the investment funds by yourself.

With an Auto Choice account you can have your account managed for you by a professional. If you are unfamiliar with financial markets that may be the better option for you. There are two subtypes within the accounts, Tier 1 and Tier 2.

 Tier 1 accounts allow withdrawal of 25% of the funds that you have contributed.

 Tier 2 accounts allow full withdrawal of your contributions, as a savings account. This will be an add-on to a Tier 1 account.

The money paid from an NPS pension can only be paid in rupees. The minimum payment you can make into the pension is 500 rupees. Annual contribution is 6000 rupees a year, minimum.

At 60 years old you can withdraw a minimum of 40% of the total contribution and a lump sum total of 60 per cent.

Jeevan Vipinachandran is a political analyst and writer, specialising in political violence and counter-terrorism. He graduated from LSE with a Masters in Comparative Politics: Conflict Studies.

He has written for the Conservative Party, Future Foreign Policy and the Times of Israel. Regular updates can be found on Twitter on @jeevanvc  and www.jeevanvc.com. Jeevan also blogs on business development and holistic lifestyle growth at www.my-wise-owl.com.

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