NPS Scheme 2026: Features, Investment Options, Minimum Contribution and More

Retirement planning in India has traditionally relied on pensions, savings, and family support, but the financial landscape has evolved. To help citizens build a secure and independent future, the Government of India introduced the NPS scheme. It encourages long-term, disciplined investing while offering transparency, flexibility, and affordability. 

Let us explore the NPS scheme details!

What is the NPS Scheme?

NPS full form is National Pension System. It is a long-term retirement savings scheme introduced by the Central Government to provide individuals with a steady income after retirement. It helps people build a pension corpus through disciplined and systematic investing during their working years.

The Pension Fund Regulatory and Development Authority, also known as PFRDA, regulates and oversees NPS under the PFRDA Act, 2013. This ensures transparency, safety, and proper governance of the scheme.

Features of the NPS Scheme

NPS features include being regulated and low-cost, with a flexible and portable account that offers market-linked returns.

Types of NPS accounts

NPS scheme details include two account structures:

Tier I Account
This is the primary pension account. It is meant for retirement savings. Contributions from you and possibly your employer are deposited here. 

Tier II Account
This is a voluntary, flexible savings account. It requires an active Tier I account. Withdrawals are unrestricted and permitted whenever required. 

Feature	Tier I Account	Tier II Account
Main Purpose	Retirement pension account	Optional investment account
Withdrawal Rules	Allowed only as per regulations	Free withdrawals
Minimum to Open	₹500	₹250
Yearly Minimum Contribution	₹1,000	No minimum requirement
AMC Charges	Applicable	Not separately applicable

Source: https://npstrust.org.in/ 

Asset Classes in NPS

When investing, individuals need to choose asset classes and a pension fund manager, along with the percentage allocation for each scheme. There are four asset classes available under a single PFM:

Asset Class E – Equity and equity-related instruments
Asset Class C – Corporate debt instruments
Asset Class G – Government bonds and related securities
Asset Class A – Alternative Investment Funds such as REITs, AIFs, CMBS, MBS, and InvITs

Important allocation rules:

• The contribution to Asset Class A cannot exceed 5 percent.
• The combined allocation across E, C, G, and A must be exactly 100 percent.
• In Tier II accounts, allocation to equity can be 100 percent.
• In Tier I accounts, allocation to equity can be up to 75 percent.

Investment Choices in NPS

Subscribers can choose how their contributions are invested through two methods:

Active Choice
You select the pension fund manager, the scheme, and the percentage allocation across asset classes. The maximum limits are:

• E up to 75 percent
• C upto 100 percent
• G up to 100 percent
• A up to 5 percent

 Investment in Asset Class A is available only in Tier I.

Auto Choice
This life-cycle option adjusts asset allocation automatically based on age. Younger investors have higher equity exposure, and as age increases, the allocation shifts towards safer debt instruments. Four Auto Choice life-cycle models are available based on risk appetite:

• Life Cycle 75 – High
• Life Cycle 50 – Moderate
• Life Cycle 25 – Low
• Life Cycle Aggressive

How NPS Work in India?

• Open an NPS account online or through an authorised Point of Presence such as a bank.
• Make regular contributions throughout your working life. Government employees may also receive employer contributions.
• Your money is invested in Asset Class E (equity), Asset Class C (corporate bonds) and Asset Class G (government securities). You may select your own allocation or choose the auto-choice option.
• The investment grows over time based on market performance, helping you build a retirement corpus.
• At age 60, you may withdraw up to 60 percent of the accumulated amount as a lump sum, and at least 40 percent must be used to purchase an annuity that provides a monthly pension.
• There are two account types. Tier I is the main retirement account with tax benefits and a lock-in until age 60. Tier II is an optional, free-withdrawal savings account available only if you hold a Tier I account.

NPS Interest Rate 2026

The current NPS interest rate ranges between 9 percent and 12 percent per annum (as of 2026), which makes it an attractive long-term investment option for building a financially secure retirement. However, NPS returns depend entirely on market performance and the chosen asset allocation. 

There is no fixed or guaranteed interest rate under this scheme, unlike traditional government-backed savings products.

Looking for a pension plan with assured payouts? Read our detailed guide on the Pradhan Mantri Vaya Vandana Yojana to know eligibility, benefits and returns.

Who Can Invest in NPS?

The National Pension System is open to all Indian citizens and offers different participation models based on employment category:

• All Central Government employees who joined on or after 1 January 2004, except members of the armed forces, are mandatorily covered under NPS. The scheme has also been extended to employees of Central Autonomous Bodies.
  
• State governments and state autonomous bodies may adopt NPS for their employees based on their respective policies.
  
• Corporations can voluntarily adopt NPS for their workforce, and contributions are made according to employment terms.
  
• Any Indian citizen, including Non-Resident Indians, between 18 and 70 years of age, can voluntarily open an NPS account for personal retirement planning.

NPS Eligibility

Criteria	Eligibility Status
Citizenship	Indian citizens and Overseas Citizens of India
Age limit	18 to 70 years
KYC compliance	Mandatory
Legal competency	Required
Number of accounts	Only one NPS account allowed
Account ownership	Individual account only

NPS Minimum Contribution

The NPS minimum contribution to open a Tier I account is ₹500. The minimum yearly contribution required to keep the Tier I account active is ₹1,000. For Tier II, the minimum amount to open the account is ₹250, and there is no minimum yearly contribution requirement.

NPS Benefits

Here are the key benefits of the National Pension System explained clearly:

1. NPS allows individuals to choose their pension fund manager, asset allocation, and contribution amount. 
2. The structure is easy to understand and operate while offering attractive tax benefits under Section 80C and Section 80CCD of the Income Tax Act. 
3. Your NPS account remains the same even if you change jobs, cities, or employers, or move between the public and private sectors. 
4. NPS is monitored by the Pension Fund Regulatory and Development Authority. Investments, charges, returns, and fund performance are disclosed regularly.
5.  You can open, manage, and monitor your NPS account digitally, update details, change investment choices, and make contributions through secure online platforms.

How to Open an NPS account

Online
The online system is the fastest and most convenient way to join NPS. 

You can open your account and make future contributions through authorised Central Recordkeeping Agencies such as Protean, KFintech, or CAMS.

Offline
You may also open an NPS account through Points of Presence appointed by the Pension Fund Regulatory and Development Authority. 

Collect and submit the registration form at a nearby PoP Service Provider. The nearest PoP-SP can be located through the CRA website.

Final Thoughts

NPS is designed for long-term, disciplined saving. It gives working professionals a structured path to retirement planning while providing transparency, tax efficiency, and market-driven growth. It allows individuals to build wealth gradually rather than depending entirely on employer pensions or uncertain savings habits.

Disclaimer- The rankings and figures in this article have been compiled from multiple verified reports, credible news sources, and public financial data available as of 2026.
All values are approximate and may vary with newer updates, revisions, or changes in official records.

NPS Scheme 2026 – FAQs