NPS Sanchay Explained: Features, Benefits, Eligibility & How It Works

Retirement planning can be challenging for individuals such as self-employed individuals, gig workers and informal workforce, who may not have the right investment option for retirement planning.

To make it accessible, the Pension Fund Regulatory and Development Authority (PFRDA) has introduced NPS Sanchay to remove complexities and make retirement planning more accessible. Its predefined investment approach will help informal sector individuals to start investing towards retirement through a structured and disciplined approach.

Here’s everything you need to know about the NPS Sanchay scheme, including its features, benefits, account opening process, comparison with the regular NPS scheme, and withdrawal rules.

What is NPS Sanchay?

NPS Sanchay is a simplified retirement-focused initiative introduced by PFRDA under the All Citizen Model and the Multiple Scheme Framework (MSF) of the National Pension System (NPS). It enables individuals to start their retirement journey with a predefined investment approach, without requiring any extensive financial knowledge or investment experience. NPS Sanchay has been introduced primarily to expand pension coverage among India’s large informal workforce.

Why Was NPS Sanchay Introduced?

India’s informal sector accounts for nearly 90% of the country’s workforce, yet a large section of this population remains outside the formal pension ecosystem.

Many individuals delay investing because:

• They are unsure where to invest.
• They find investment choices confusing.
• They lack access to financial advice.
• They are unfamiliar with retirement planning.

PFRDA introduced NPS Sanchay as a simplified retirement solution to address these challenges and remove investment complexity while retaining the core benefits of the National Pension System. It encourages more individuals to start saving for retirement at an early stage.

What is the Objective of NPS Sanchay?

NPS Sanchay has been designed with the objective of making retirement planning easier and more accessible for everyone.

Its key objectives include:

• Encourage retirement planning among all citizens.
• Simplify investment decisions.
• Expand pension coverage across India.
• Offer a government-regulated retirement solution.
• Make NPS easier to understand and adopt.

These objectives make NPS Sanchay useful for individuals who look for a simple retirement planning option without having to actively manage their investments.

Key Benefits of the NPS Sanchay

• Easy Retirement Solution: NPS Sanchay removes the need to understand complex investment options.
• Pre-defined Investment Allocation: Subscribers are not required to actively decide the allocation across different asset classes.
• Government-Regulated Scheme: NPS Sanchay operates within the National Pension System, which is regulated by PFRDA.
• Professionally Managed Investments: The investments are managed by registered Pension Fund Managers, helping subscribers benefit from professional fund management.
• Flexible Contributions: Subscribers can contribute according to the prescribed NPS rules, making it easier to invest based on their financial capacity.
• Tax Benefits: Contributions to NPS Sanchay are eligible for tax benefits under the applicable provisions of the Income Tax Act.
• Long-Term Wealth Creation: Regular contributions encourage disciplined savings to build a retirement corpus.
• Cost-Effective Pension Solution: NPS Sanchay offers one of the most cost-effective retirement products available.

Who Can Benefit from NPS Sanchay?

Though the scheme was introduced to improve pension coverage among the informal workforce, it is open to all eligible Indian citizens.

NPS Sanchay is suitable for:

• Daily wagers
• Shopkeepers
• Gig and platform workers
• Farmers
• Small business owners

Product Features of NPS Sanchay

NPS Sanchay combines a simplified investment approach with flexible features that help subscribers save for retirement. Here are the key product features of NPS Sanchay:

Investment & Contribution

• You can start investing with just ₹250.
• The Minimum amount required for every subsequent contribution is ₹10.
• There is no mandatory annual contribution requirement.
• Investors follow a default investment allocation aligned with Government Sector schemes.

Investment Flexibility

• The option to switch the Pension Fund once every financial year.
• Investment choice can be changed up to four times during a financial year.

Partial Withdrawal

• Withdraw up to 25% of their own contributions.
• Up to four partial withdrawals before reaching the age of 60 years.
• No restriction on the number of withdrawals after age 60, subject to a minimum three-year gap between withdrawals.

Exit Benefits

• Normal exit after completing 15 years of subscription or attaining the age of 60 years, whichever is earlier.
• Up to 80% of the accumulated corpus can be withdrawn as a lump sum.
• A minimum of 20% of the corpus is required to purchase an annuity, which provides a regular pension after retirement.

Special Exit Provisions

• Corpus up to ₹8 lakh: Eligible for 100% withdrawal.
• Corpus between ₹8 lakh and ₹12 lakh: Flexible withdrawal options available.
• Corpus above ₹12 lakh: Up to 80% can be withdrawn as a lump sum, with a minimum of 20% that must be used to purchase an annuity.

Death Benefit

• 100% of the accumulated corpus is payable to the nominee/legal heir.

Loan Facility

• Up to 25% of own contributions can be used as collateral for financial assistance from regulated financial institutions, subject to applicable guidelines.

Who is Eligible to Open an NPS Sanchay Account?

An individual can open an NPS Sanchay account if they:

• Are an Indian citizen.
• Are between 18 and 85 years of age.
• Are KYC compliant.
• Open the account through an authorised Point of Presence (PoP) or an approved online platform.

The simple eligibility criteria make the scheme accessible to individuals looking to build long-term retirement savings.

How Does the Investment Philosophy of NPS Sanchay Work?

Unlike regular NPS, where subscribers are required to choose their preferred investment option and decide how their contributions should be allocated across different asset classes.

NPS Sanchay is a simplified process that follows a predefined investment pattern aligned with Government Sector schemes, eliminating the need for subscribers to actively select or manage their investments.

This makes retirement planning easier for individuals who may not have prior investment experience or who prefer a simple pension solution.

Conclusion

NPS Sanchay is designed to make retirement planning simpler for individuals such as gig workers, farmers, and others in the informal workforce, who may lack access to organised pension benefits.

This scheme removes the complexity of investment decisions and encourages disciplined retirement savings with its predefined investment approach and flexible contribution options.

While it is available to all eligible Indian citizens, NPS Sanchay can be particularly beneficial for those looking for a simple, government-regulated retirement solution.

Frequently Asked Questions

Q1: Who can invest in the NPS Sanchay scheme?

Any KYC-compliant Indian citizen between 18 and 85 years of age can open an NPS Sanchay account through an authorised Point of Presence (PoP) or an approved online platform.

Q2: Can I make partial withdrawals from NPS Sanchay?

Yes. Subscribers can withdraw up to 25% of their own contributions, subject to the withdrawal conditions specified under the scheme.

Q3: What is the minimum contribution required?

You can start investing with ₹250, while the minimum amount required for every subsequent contribution is ₹10.