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PFRDA Discontinues Credit Card Payment Facility in Tier-II NPS Account

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PFRDA discontinues credit card payment facility in Tier-II NPS Account

The Pension Fund Regulatory and Development Authority (PFRDA) has decided to discontinue the facility to pay subscriptions/contributions in the Tier-II account of the National Pension System (NPS) using credit cards as a mode of payment on August 3, 2022.

  • As a result, all Points of Presence (POPs) have been directed to discontinue accepting credit cards as a means of payment for the NPS Tier-II account with immediate effect.

Section 14 of the Pension Fund Regulatory and Development Authority Act 2013 grants the authority “to protect the interests of subscribers and to regulate, promote, and ensure the orderly growth of the national pension system and pension plans to which the Act applies.”

Key Points

i. NPS was the only saving instrument that permitted account holders to invest using credit cards via the eNPS

ii.While the NPS Tier-I account can still be paid for using credit cards, the NPS Tier-II account does not accept credit card payments.

iii. Due to the risk of over-leveraging on high-interest funds, using credit cards to pay for investment schemes like mutual funds or stocks, etc. is generally discouraged.

iv.Users must pay a payment gateway fee of 0.60 % (excluding of GST) when making an NPS contribution using a credit card through net banking.

NPS Tier-II Account: A Voluntary Savings Account

i. A NPS Tier-IIaccount functions as a voluntary savings account, and only NPS Tier-I account holders are eligible to open a NPS Tier II

ii.NPS Tier-II accounts have more flexible exit and withdrawal rules in contrast to NPS Tier-I accounts. Contributions to the NPS Tier II account are also not tax exempt.

  • NPS Tier-II accounts allow users to withdraw funds at any moment. An NPS Tier-II account has no minimum balance requirement.
  • On the other hand, NPS Tier-I investment is a long-term one, and the money cannot be withdrawn until retirement.

iii. The minimum contribution required to open a NPS Tier-II account is Rs. 1000.

  • After the NPS Tier-II account is opened, contributions may be made in multiples of Rs. 250 with no maximum limit.

iv.ANPS Tier-II account does not have a mandatory annual contribution requirement.

  • While, NPS Tier-I account mandates the subscriber to contribute a minimum of Rs. 1,000 every year.

v.When a subscriber opens a NPS Tier II account, there will be a delay of up to 15 working days at the time of initial registration and up to 7 working days for subsequent contributions.

  • This will be between the time the subscriber deposits Cash/DD/Cheque with the POP-SP and the time the units are credited to his or her account.

vi.This service is now available to State Government employees, and will be made available to Central Government employees in the near future.

Growth in Pension AUM

  • India’s pension Assets Under Management (AUM) are growing at a compound annual growth rate (CAGR) of between 27 % and 30 %. Pension AUM is currently over Rs. 7.4 lakh crore.
  • In 2021-22, Total pension AUM fell short of the PFRDA’s target of Rs. 7.5 lakh crore target set for that year.

Additional info:

i.During account opening, subscribers have to contribute Rs 500 for Tier I (pension) account and Rs 1,000 for Tier II (investment) account

ii.Opening of Individual Pension Account under NPS (only Tier I / Tier I & Tier II) by All Indian Citizens (including NRIs) between 18 – 70 years.

Recent Related News

In June 2022, The Government of India (GoI) has appointed Pankaj Sharma, the Joint Secretary in the Department of Financial Services (DFS) as a part-time member of PFRDA. He succeeded erstwhile DFS Additional Secretary Vandita Kaul.

About Pension Fund Regulatory and Development Authority (PFRDA):

Chairman – Supratim Bandyopadhyay
Establishment – 2003
Headquarters – New Delhi, Delhi