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The Pension Fund Regulatory and Development Authority (PFRDA) introduces Default Scheme in NPS Tier II for Government Sector Subscribers

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The Pension Fund Regulatory and Development Authority (PFRDA) in its recent circular has decided to extend Default Scheme for Government Sector Subscriber in Tier II as well, which was till now available only for Tier I account of Government Sector Subscriber.

Under the Default Scheme, the contribution of Government Sector Subscriber is allocated to three public sector Pension Fund Managers, i.e., SBI Pension Funds Pvt. Ltd., UTI Retirement Solutions – NPD, and LIC Pension Fund Limited in a predefined proportion. This option of having multiple pension fund managers is provided by default to all the Government Sector Subscribers but is not available for corporate sector and individual subscribers.

NPS Tier II account, unlike Tier I account, is an optional account which does not have a lock-in period and minimum annual contribution requirement. Further, the subscriber can transfer contributions from Tier II account to Tier I account at any time. The circular also clarifies that the the existing Scheme E (Equity-related instruments), Scheme C (Corporate debt-related instruments), and Scheme G (Govt Bond-related instrument) options shall also be available for the Government Sector Subscriber s available to other subscribers.

The decision of PFRDA intends to make Tier II accounts more attractive to Government Sector Subscribers, which is availed by only a miniscule number of Tier I subscribers till now.

A copy of the said Circular titled NPS Tier II through Default scheme for Government Sector Subscribers-reg is enclosed below.

Readers are welcome to send their views to Regstreet Law Advisors at info@regstreetlaw.com.

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