PFRDA allows NRIs and OCIs to retain NPS Tier I accounts, subject to banking requirements, while Tier II remains unavailable
Indian citizens moving overseas do not have to automatically close their National Pension System (NPS) accounts after becoming non-resident Indians (NRIs), according to rules outlined by the Pension Fund Regulatory and Development Authority (PFRDA).
The pension regulator allows NRIs and Overseas Citizens of India (OCIs) to maintain NPS Tier I accounts, provided they meet the applicable conditions. For NRIs, proof of an eligible Non-Resident External (NRE) or Non-Resident Ordinary (NRO) bank account is required.
The NPS is designed to remain portable across employment and geographical locations. This means an Indian citizen who relocates abroad can continue contributing to an existing Tier I account rather than being required to withdraw the accumulated retirement savings.
However, the rules differ for Tier II accounts. PFRDA states that NRIs and OCIs cannot activate a Tier II account. The restriction has been in place since the regulator allowed OCIs to participate in NPS and applies even when a subscriber already holds a Tier I account.
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NRIs can continue to invest their NPS savings across permitted asset classes, including equities, corporate bonds and government securities
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Under the Active Choice option, subscribers can decide their asset allocation within prescribed limits, while Auto Choice adjusts the allocation based on the selected life-cycle strategy and age
Subscribers can also change their pension fund once during a financial year and alter their investment choice up to four times in a financial year.
The rules become different if an individual gives up Indian citizenship without holding an OCI card. PFRDA has separate provisions for closing such NPS accounts and settling the accumulated corpus.
For Indians who move abroad while retaining their citizenship, the main requirements are therefore to comply with NRE/NRO banking rules and the restrictions applicable to NRI subscribers.
