As mentioned earlier, Tier 1 and Tier 2 are two types of NPS accounts, having a similar kind of structure. Both the charges and choice of fund schemes are pretty similar; however, having a Tier 1 is mandatory to open an NPS Tier 2 account.
Tier 1 NPS account is primarily meant for retirement savings where you have to make a minimum contribution of ₹500 while opening the account. Under this scheme, you can withdraw up to 60% of the total amount you have accumulated after your retirement.
The remaining 40% of the corpus is utilised to buy annuities to secure a regular monthly income source in the form of a pension.
If you are wondering what Tier 1 and Tier 2 NPS accounts are, here is what the latter one represents.
On the other hand, NPS Tier 2 is an open-access account you can opt for with a minimum investment of ₹1000. The withdrawal process generally takes three days to get funds transferred from the trustee’s bank account to yours. You can either withdraw the entire corpus as a lump sum or go for multiple withdrawals without any limit.
While certain similarities are there in terms of functionality, Tier 1 and Tier NPS differences are apparent.
Now that you know the meaning of Tier 1 and Tier 2 in NPS let’s learn about these differences.