Moving abroad? Know what happens to your NPS account after you become an NRI

What will happen to my investments in India when I move abroad? This is the question many Non-Resident Indians (NRIs) may want to know if they are planning to move abroad or have already moved. Many NRIs who invest in the National Pension System (NPS) may also have a similar question about their NPS investments. They must know the latest NPS rules for NRIs.

What will happen to NRIs’ NPS contributions once they move abroad?

NRIs can withdraw their NPS Tier I or II account corpus before moving abroad or, if they want to continue investing in NPS, they are allowed to do that also.

However, NRI and Overseas Citizens of India (OCI) subscribers living abroad can make contributions to their NPS Tier I or II account only through a Non-Resident External (NRE) or a Non-Resident Ordinary (NRO) account. If an NRI wants to get their NPS corpus repatriated, they should make contributions through an NRE account.

What are investment options available to NRIs under the NPS?

NRI subscribers can invest in Tier I and II NPS accounts. Like other NPS subscribers, NRIs’ NPS funds are invested in government securities, corporate bonds and equities. NRIs also have the freedom to select the pension fund manager and investment options.

NRIs’ contributions in NPS are primarily invested in three main asset classes:

Equity (E): This asset class may give a high return, but it is also a high-risk investment option that primarily invests in stock market securities.

Corporate Debt (C): Under this option, funds are invested primarily in fixed-income securities.

Government Securities (G): This scheme invests in government securities. It is a low-return, low-risk investment option.

NRIs can select their investment mix (E, C, G) based on their risk appetite and retirement corpus goals.

NRI investment choice: Active or passive choice

The NPS offers two main investment choices to its subscribers: Active Choice and Auto Choice. NRIs can opt for both of them.

Active Choice: Under this option, NRIs can decide on the allocation across asset classes (E, C, G).

Auto Choice: Under this option, an NRI’s investment is automatically managed based on their age.

There are three NPS investment options in Auto Choice.

Aggressive (LC-75): Under this, the maximum equity exposure is 75% up to the age of 35.

Moderate (LC-50): The maximum equity exposure is 50% up to the age of 35.

Conservative (LC-25): The maximum equity exposure is 25% up to the age of 35.

What is the National Pension System NPS?

The NPS is a retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Its primary goal is to provide retirement income by encouraging regular savings during an individual’s working life.

NPS subscribers can invest in a mix of equities, corporate bonds, and government securities. They also have the flexibility to choose a fund manager and investment option with the NPS (e.g., active or auto allocation).