Mechanism

What makes NPS an excellent pension vehicle is its low cost and the ease with which an individual can invest for retirement. It hinges on a Central Recordkeeping Agency (CRA), which captures your data when you open your Tier I account and issues you a Permanent Retirement Account Number (PRAN).

This number remains the same even if you change jobs or location. You would also be given Internet passwords for online transactions.

NPS is the cheapest among retirement products, after the Public Provident Fund (PPF) and the Employees' Provident Fund (EPF),  both of which are charge-free. NPS has two sets of charges -- flat and variable.

You would need to pay about Rs 470 as flat charges every year, but this is expected to come down as volumes go up.

The variable charges are custodian charge of 0.0075-0.05 per cent of the fund value per annum and fund management charge of 0.0009 per cent of the fund value per annum. These are the lowest in the industry.

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