PFRDA bars third party payments in Tier II accounts of NPS

To check misuse of NPS, regulator PFRDA has said contribution to savings account (also called Tier-II account), which is attached to pension funds, can only be made by the subscriber and not by any third party.

National Pension System (NPS) is structured into Tier-I (main pension account) and Tier-II (voluntary savings account).

"Keeping in view the nature of the Tier-II account and facility of any time withdrawal, it has been decided to disallow any third party contribution in Tier-II account henceforth," Pension Fund Regulatory and Development Authority (PFRDA) said in a circular.

It has asked the nodal offices and Points of Presence (POPs) to ensure that NPS contribution by the subscriber to the NPS Tier-II account "is being made from his/her own bank account" and through own legitimate source of funds.

Further, Central Record Keeping Agency and nodal officers/ POPs have been asked to take a declaration from subscribers that the transaction for his or her Tier-II account is "from my own bank account and through my legitimate source of funds".

However, in case the contribution is being made directly through the subscribers bank account, the declaration would not be required.

Tier-I account is the non-withdrawable permanent retirement account into which the accumulations are deposited and invested as per the option of the subscriber.

Tier-II account is a voluntary savings account which can be opened along with Tier-I account under NPS or activated by the Tier-I account holder on later date.

PAN is mandatory for opening Tier-II account.

As on November 30, 2016 there were about 1.4 crore subscribers under NPS with over Rs 1.61-lakh crore asset under management.