The National Pension System (NPS) is a defined-contribution-based pension system launched by the Government of India with effect from 1 January 2004. Like most other developing countries, India did not have a universal social-security system to protect the elderly against economic deprivation. As a first step towards instituting pension reforms, the Government of India moved from a defined-benefit pension to a defined-contribution-based pension system. Apart from offering a wide gamut of investment options to employees, this scheme helps the Government of India to reduce its pension liabilities. Unlike existing pension fund of the Government of India that offered assured benefits, NPS has defined contribution and individuals can decide where to invest their money. The scheme is structured into two tiers:
Tier-I account: This NPS account does not allow premature withdrawal and is available to all citizens from 1 May 2009.
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