Retirement and pensions

99 terms · each links to a full explanation with a worked example and the exam traps

Accumulated pension wealthThe official NPS term for the money value of the pension investments in a subscriber's Permanent Retirement Account — the figure that decides how much can be taken as a lump sum and how much must buy an annuity.
Accumulation stageThe working years, in which saving and investment build the retirement corpus — the stage where the ability to take risk is highest and where time, not contribution size, does most of the work.
Active ChoiceThe NPS investment option under which the subscriber sets the split across the E, C, G and A asset classes personally, subject to a 75 percent cap on equity and 5 percent on alternatives.
All Citizen ModelThe voluntary NPS model for Indian citizens, resident or non-resident, and OCI cardholders, in which the subscriber alone contributes, makes the choices and bears the Tier I and Tier II charges.
Allocation including the retirement corpusTwo ways to state an investor's debt-versus-equity split — counting the retirement corpus in the calculation, or leaving it out — which can give quite different allocation percentages from the same portfolio.
AnnuityAn insurance contract in which a corpus paid as a lump sum or in instalments buys a periodic payment from the insurer, at a rate fixed at purchase and guaranteed for life or the contracted term.
Annuity Service ProviderAn IRDAI-registered life insurance company empanelled by PFRDA to sell NPS subscribers the annuity they must buy on exit, and to pay the pension for the life of the contract.
Approved superannuation fundA superannuation fund approved by the Income Tax Commissioner under the Fourth Schedule — letting the employer deduct its contributions and giving the fund's income, and specified payouts, tax exemption.
Atal Pension YojanaA government-guaranteed defined-pension scheme for unorganised-sector workers, paying a fixed Rs 1,000 to Rs 5,000 a month from age 60 for contributions started between ages 18 and 40.
Auto ChoiceThe NPS investment option in which your contributions go into a lifecycle fund that automatically cuts equity and raises corporate bonds and government securities as you grow older.
Capital protectionThe requirement, once income generation begins in retirement, that a product not put the underlying principal at risk in the pursuit of income — one of the two evaluation criteria the workbook sets for the retired phase.
Central Recordkeeping AgencyThe intermediary that holds every NPS subscriber record — it issues the PRAN, unitises contributions at scheme NAV and sits between the subscriber, the pension funds and the trustee bank.
Common SchemesThe pre-existing NPS Active Choice and Auto Choice (life-cycle) options, now given this collective label to set them apart from the newer, persona-targeted schemes launched under the Multiple Scheme Framework.
CommutationTaking a portion of a pension or annuity corpus as a lump sum at retirement instead of as income — typically up to one-third in superannuation funds and insurers' pension plans.
Corporate modelThe NPS model that lets companies and other registered entities offer their employees a pension benefit through the NPS architecture, funded by the employer, the employee, or both.
Cost of delayHow much more an investor must save each month for the same retirement corpus, purely because they started later — the workbook shows the required monthly saving multiply several times over across ages 30, 35 and 40.
Deferred annuityAn annuity whose payments start at a vesting age some time after purchase, so the corpus is built or held in the deferment period and income is locked in for the later years of retirement.
Defined Benefit (DB) schemeA retirement scheme where the pension amount is fixed in advance, usually as a percentage of last-drawn salary, regardless of how the underlying investments perform.
Defined Contribution (DC) schemeA retirement scheme where the contribution amount is fixed but the eventual pension is not — it depends entirely on the returns earned on the invested corpus.
Distribution stageThe retired years, in which the corpus built during working life is converted into periodic income — the stage where protecting capital matters more than growing it, because it can no longer be topped up.
Dormant accountAn NPS account that goes dormant when the subscriber fails to contribute at least Rs 1,000 in a year, and is closed outright once its value falls to zero.
Dormant EPF accountAn EPF account with no contribution for 3 straight years — it still earns taxable interest until retirement, unlike an inoperative account, where interest stops altogether.
D-RemitA facility that lets NPS subscribers make voluntary contributions straight from their bank account into their NPS account, via a dedicated virtual ID, with same-day investment if received before the cut-off.
Employee Pension SchemeA government-guaranteed pension scheme funded by diverting 8.33% of the employer's EPF contribution, plus a 1.16% central government top-up, paying members a lifelong pension from age 58.
Employee Provident FundA mandatory retirement savings scheme where employer and employee each contribute 12% of basic pay, credited to the employee's own account and paid out as a lump sum at retirement.
Employees Pension Scheme shareThe 8.33% slice of the employer's 12% EPF contribution that is diverted into EPS instead of the employee's own provident fund balance — capped by a Rs 15,000 monthly wage ceiling, and earns no interest.
EPFOThe Employees Provident Fund Organisation — the body that administers and supervises the Employee Provident Fund for private-sector employees, into which both employee and employer contribute towards retirement.
Expense Protection MethodA way of estimating retirement income need by listing expected pre- and post-retirement expenses head by head and inflating the total to the retirement date — more precise than a replacement ratio, but cumbersome.
Five-year service testThe rule that makes an EPF withdrawal tax-free: complete five consecutive years of service and the balance is exempt; withdraw before that and it is taxable, with two exceptions.
Government modelThe NPS model that mandatorily covers Central and State Government employees who joined on or after 1 January 2004, with a 10% employee and 14% government monthly contribution.
GratuityA lump sum an employer must pay under the Payment of Gratuity Act, 1972 on termination after at least five years of continuous service, a condition waived on death or disablement.
Immediate annuityAn annuity whose payments begin soon after it is bought — generally within 12 months — usually purchased with a single lump-sum premium at retirement.
Jeevan PramaanThe digital life certificate a pensioner can submit online, using Aadhaar and a mobile, at jeevanpramaan.gov.in, instead of visiting the bank branch in person.
Joint annuityAn annuity payout option under which the spouse continues to receive the annuity for lifetime after the death of the investor.
LadderingBuying bonds or fixed deposits maturing at staggered dates rather than all in the same year, so that interest rate risk is spread and a maturity arrives every year to fund income.
Life CertificateThe annual proof-of-life a pensioner must submit to their bank branch every November to keep their pension account operative.
Lifecycle fundThe NPS Auto Choice investment option that shifts a subscriber's money away from equity and toward safer bonds and government securities automatically, as they age.
Life expectancyThe average period a person is expected to live, based on birth and death statistics. In India it rose from 58 years in 1990 to 72 in 2024 — good news that creates longevity risk for retirement.
Life-stage evaluationJudging a retirement benefit product against the objectives of the stage the investor is in — pre-retirement, retirement or post-retirement — because each stage needs a different thing from the product.
Longevity riskThe risk that a person outlives their retirement assets — living longer than the plan assumed, so the corpus runs out while income is still needed.
Market linked retirement productsRetirement accumulation products whose return depends on markets — NPS, ELSS and other mutual fund schemes — set against non-market-linked products such as PPF, where the principal is not at risk.
Multiple EPF accountsThe scattered EPF balances that build up when an employee opens a fresh account with each new employer instead of transferring the old one, losing compounding and risking tax on old balances.
Multiple Scheme FrameworkThe PFRDA framework, effective 1 October 2025, that lets non-government NPS subscribers hold branded pension-fund schemes alongside the existing Common Schemes under a single PRAN at each CRA.
National Pension SystemA PFRDA-regulated, defined-contribution retirement scheme in which the subscriber builds a market-linked corpus and must convert part of it into an annuity at exit; there is no guaranteed return.
Normal exitExit from the NPS on reaching the scheme's qualifying event — 60, or 15 years of subscription under the All Citizen Model — with a larger lump-sum share than a premature exit and a smaller compulsory annuity.
NPS e-ShramikPFRDA's Platform Service Partner model, which extends the NPS to gig and platform workers through aggregators such as food-delivery and ride-hailing platforms, with no minimum threshold of its own.
NPS final withdrawalPFRDA's exit rules for closing an NPS account: a mandatory minimum annuitisation, small-corpus exceptions letting the whole balance be withdrawn, and a tax exemption of up to 60% of the corpus.
NPS partial withdrawalTax-exempt withdrawal of up to 25% of an NPS employee's own contributions before final exit, though the workbook's own chapters disagree on how many times a subscriber may use it.
NPS SwasthyaA PFRDA initiative that pairs old-age income security with healthcare coverage in a single product, introduced because out-of-pocket medical spending is a major drain on retirement savings.
NPS Tier-II Tax Saver SchemeA Tier II NPS option for Central Government subscribers with an active Tier I account whose contributions qualify for the old-regime deduction, subject to a three-year lock-in per contribution.
NPS TrustThe trust set up by PFRDA under the Indian Trusts Act that holds all NPS assets for subscribers' benefit and supervises the other intermediaries, run by a board of five to eleven trustees.
NPS Trust escalationThe second tier of NPS grievance redress: if an intermediary has not resolved a subscriber complaint within 30 days, or resolved it unsatisfactorily, the subscriber registers it with the NPS Trust.
NPS VatsalyaA saving-cum-pension scheme introduced in Budget 2024 under which a parent opens and operates an NPS Tier 1 account in a minor child's name until the child turns 18.
Old Pension SchemeThe unfunded, pay-as-you-go defined benefit pension for government employees who joined before 1 January 2004, paying 50 per cent of last drawn salary plus dearness relief out of the budget.
Partially inflation-linked pensionA pension that adjusts to inflation only in part, as in the workbook's Case 4, where the pension rises by just 50% of inflation, leaving a shortfall the retiree must fund from other savings.
PensionA regular payment a person receives after retiring from regular work, or on reaching a certain age, so they have an income once they stop earning.
Pension AgentA person a Point of Presence engages, with Board approval, to extend NPS distribution — who may take registrations, contributions and service requests but may not process exits or accept cash.
Pension fundA managed vehicle that pools subscribers' contributions and invests them across equity, corporate bonds and government securities to build a retirement corpus — a registered intermediary under the PFRDA Act.
Permanent Retirement Account NumberThe unique account number issued when an NPS account is opened; it stays with the subscriber for life and across employers, which is what makes NPS portable in a way EPF historically was not.
Point of PresenceThe NPS distribution layer — a registered intermediary that onboards subscribers, collects contributions and processes service and exit requests, needing Rs 2 crore of net worth and electronic connectivity to the CRA.
Post Office Monthly Income SchemeA five-year, government-guaranteed post office deposit paying interest every month, with a Rs 1,500 minimum, a Rs 9 lakh single or Rs 15 lakh joint maximum, and no tax benefits.
PPF extension with contributionThe option, chosen within one year before a PPF account matures, to keep the account running in blocks of 5 years with further contributions — capped at 60% withdrawal of the balance per extension block.
PPF extension without contributionThe default PPF extension route if no active choice is made at maturity — the account continues in 5-year blocks with no further deposits, but allows one withdrawal a year of any amount up to the full balance.
Pradhan Mantri Vaya Vandana YojanaA closed Government of India pension scheme for those aged 60 and above, run by LIC, paying a guaranteed pension for 10 years and returning the purchase price at maturity; no new enrolment after 31 March 2023.
Premature exitExit from the NPS before the qualifying event — resignation, or before 60 — where only up to 20 percent comes out as a lump sum and at least 80 percent must buy an annuity.
Preparation stageThe first of the workbook's three retirement-planning life phases — the working years, when the concerns are child education, buying a house, adequate insurance, and recognising the impact of ageing.
Pre-retirement stageThe middle of the three phases of retirement planning — the years just before and around retiring, when physical and psychological changes arrive and the rules and procedures must be learned.
Project OASIS ReportThe 2000 report of the S.A. Dave committee on old-age income security, which recommended moving India from unfunded defined-benefit pensions to funded individual accounts — the design the NPS was built on.
Public Provident FundA 15-year government-guaranteed savings account for individuals, at a rate reset quarterly, where the contribution, the interest and the maturity value are all outside tax under the old regime.
Replacement Ratio MethodA way to estimate retirement income need as a fixed percentage of pre-retirement income — say 80% — in the first year of retirement, increased by inflation every year after that.
Retirement AdviserA PFRDA-registered individual or firm that advises subscribers on the NPS for a fee, acting in a fiduciary capacity and never collecting cash for contributions.
Retirement corpusThe pool of money built up during a person's working years whose only job, after retirement, is to generate the income that used to come from a salary.
Retirement Income SchemeThe NPS life-cycle scheme that holds the drawdown corpus during decumulation, cutting equity on a glide path from 35 per cent at 60 to 10 per cent at 75, while paying out through SPR or SUR up to age 85.
Retirement planningThe process of putting in place a roadmap for retirement: defining the income the envisaged lifestyle needs, sizing the corpus, and saving and investing to build and then draw it down.
Reverse mortgageA loan that pays a senior citizen a periodic income against a pledge of the residential property they live in, repayable from the sale of that property after death or permanent departure.
Reverse Mortgage Loan Enabled AnnuityAn extension of the reverse mortgage in which the lender uses the loan amount to buy a lifetime annuity from an insurer, so the senior citizen's income lasts for life rather than the loan tenure.
Safe Withdrawal RateThe largest share of the starting corpus that can be withdrawn in the first year of retirement, then raised each year by inflation, while the portfolio survives the planned period with high probability.
Salary for NPS purposesFor NPS contribution and deduction limits, "salary" means only basic pay plus dearness allowance where the terms of employment count it towards retirement benefits — every other allowance and perquisite is excluded.
Second careerPaid work a retiree takes up in the early retirement years, not necessarily connected to their old job, used to delay drawing on the retirement corpus or to help close a shortfall in it.
Senior Citizens Saving SchemeA five-year, government-guaranteed deposit for those aged 60 or above, capped at Rs 30 lakh across accounts, paying interest every quarter at a rate the government announces quarterly.
Staggering income investmentsBuying income-generating retirement products in tranches over time, instead of committing the whole retirement corpus at once, so a retiree is not locked into one interest-rate environment for life.
Statement of TransactionAn annual NPS statement, sent physically or by email, that records a subscriber's contributions and account activity for the financial year.
Step-up strategyRaising retirement contributions by a set percentage every year instead of holding them flat, so that a saver who cannot afford the full fixed amount today still reaches the corpus.
SuperannuationAn organisational pension programme set up by an employer for its employees, funded through an irrevocable trust or a life insurer, typically paying annuities on retirement.
Superannuation benefitAn employer-funded retirement scheme, on top of the mandatory PF, that pays one-third of the accumulated corpus as a lump sum and converts the rest into an annuity.
Superannuation trustThe irrevocable trust, distinct from the employer, through which a superannuation scheme is funded - the second of the two arrangements the workbook allows, and in practice the only permitted one.
Systematic Lump Sum WithdrawalAn NPS exit mode that pays out the eligible lump-sum portion of a subscriber's corpus in periodic instalments, up to age 85, instead of as one payment.
Systematic Payout RateThe default NPS drawdown method: each year the payout rate is 1 ÷ (drawdown end age − current age), applied to the corpus value on the subscriber's birthday.
Systematic Unit RedemptionAn NPS exit mode that redeems a fixed number of units every period over the chosen drawdown period — minimum six years — so the rupee payout moves with the NAV.
Tier I accountThe mandatory NPS retirement account: restricted withdrawals, a 75% equity cap, tax benefits and compulsory annuity purchase with part of the corpus on exit.
Tier II accountThe voluntary NPS investment account open only to holders of an active Tier I account, with no withdrawal restrictions, no mandatory annuity and, except for NPS-TTS, no tax benefit.
Trustee BankThe scheduled commercial bank, currently Axis Bank, that holds NPS funds on behalf of the NPS Trust and moves money between subscribers, pension funds and annuity providers.
Unbundled architectureThe NPS design principle of splitting authority and responsibility across separate, independent intermediaries, rather than concentrating decision-making with any single entity.
Underfunding of the retirement goalA retirement corpus that turns out to be smaller than what is actually needed, forcing a retiree to cut expenses, postpone retirement, or find another source of income.
Unified Pension SchemeAn option under the NPS for Central Government employees, effective 1 April 2025, that adds an assured payout of 50 percent of the last 12 months' average basic pay after 25 years of qualifying service.
Universal Account NumberA 12-digit number allotted to every employee contributing to the EPF, unchanged for life across every employer — the key that makes an online PF transfer possible instead of a taxable withdrawal.
Voluntary Provident FundAn EPF member's option to contribute more than the mandatory 12% of basic and dearness allowance into the same EPF account, up to 100% of it, with no matching contribution from the employer.
Years in retirementThe number of years from the start of retirement to the end of life for which income must be secured. It cannot be known precisely and directly sets the size of the retirement corpus.
Years to retirementThe period from now to the retirement date, or retirement age minus current age. It drives both how much inflation raises future expenses and how long savings have to compound.