The Permanent Retirement Account Number and the Tier I and Tier II Accounts

Every NPS subscriber is identified by a single, lifelong number, the Permanent Retirement Account Number (PRAN). Under that number sit two kinds of account: the Tier I (Tier 1) pension account required by Section 20(2) of the PFRDA Act, and the optional Tier II (Tier 2) account provided by Section 20(3). The distinction between them, a locked retirement account and a flexible savings account, is basic to understanding how the NPS works.

1. The Permanent Retirement Account Number

What it is: a unique twelve-digit number allotted to each subscriber by a central recordkeeping agency (CRA).
One subscriber, one PRAN: a person may hold only one PRAN. Holding more than one is not permitted, and duplicate accounts must be closed and merged.
Lifelong and portable: the PRAN stays the same across changes of employer, sector, city or point of presence, and from employment to self-employment. This gives effect to the portability required by Section 20(2).
Record of everything: contributions, scheme choices, switches, withdrawals, nominations and the final exit are all recorded against the PRAN by the CRA.
Access: subscribers can view statements and give instructions online through the CRA, using the PRAN and a password, and through mobile applications.

Central recordkeeping agencies

The CRA function was first performed by NSDL (now Protean eGov Technologies). Further CRAs have since been registered, such as KFin Technologies, so that subscribers may choose and, where permitted, shift their account between CRAs. The CRA is an intermediary registered and regulated under Section 21 of the Act.

Opening a PRAN

Through a point of presence, such as a bank branch, or online through eNPS, using KYC documents, usually Aadhaar and PAN.
Through the employer, for Government and corporate employees, whose nodal offices register them.
Nomination: the subscriber should nominate one or more persons, with shares, to receive the corpus on death.

2. The Tier I Account

Statutory basis: the individual pension account under Section 20(2). It is mandatory: every PRAN has a Tier I account.
Purpose: saving for retirement. Money is locked in until normal exit.
Withdrawals: only partial withdrawals for specified purposes, subject to conditions, of up to 25 per cent of the subscriber's own contributions, the limit fixed by Section 20(2).
Exit: only as provided by the exit regulations, ordinarily at sixty or superannuation, with compulsory annuity purchase from part of the corpus.
Minimum contribution (All Citizen model): ₹500 at opening, and ₹1,000 in a financial year to keep the account active.
Tax: Tier I contributions qualify for deductions under the income tax law, within limits, and part of the corpus withdrawn at exit is tax-free.

3. The Tier II Account

Statutory basis: the optional account under Section 20(3).
Prerequisite: available only to a subscriber who already holds an active Tier I account.
Withdrawal at any time: the subscriber may withdraw at any time, without lock-in and without compulsory annuity.
Investment choice: the subscriber may choose pension funds and schemes separately from the Tier I choice.
Minimum contribution: ₹1,000 at opening; there is no annual minimum to keep the account active.
Tax: generally no deduction is available for Tier II contributions. Central Government employees have a Tax Saver Tier II variant with a deduction and a three-year lock-in.

4. Tier I and Tier II Compared

Nature: Tier I is a retirement account; Tier II is a voluntary savings account, similar in function to a low-cost investment fund.
Compulsion: Tier I is mandatory for every PRAN; Tier II is optional.
Liquidity: Tier I is locked until exit, with limited partial withdrawals; Tier II allows withdrawal at any time.
Annuity: compulsory annuitisation of part of the Tier I corpus at exit; none for Tier II.
Tax: Tier I attracts deductions and favourable treatment at exit; Tier II generally does not.
Transfer: money may be moved from Tier II to Tier I, but not the other way, because that would defeat the lock-in of the pension account.

5. Why the Two-tier Design?

The two-tier design reconciles two aims. The Tier I account must be illiquid to serve its purpose: if subscribers could withdraw freely, many would reach old age without savings. The Tier II account offers the low costs and professional management of the NPS to subscribers who want flexibility, encouraging them to use the system and, eventually, to build their Tier I savings. Parliament wrote both into the Act, with the 25 per cent limit for Tier I and the right to withdraw at any time for Tier II.

6. Account Maintenance

Frozen accounts: a Tier I account in which the minimum annual contribution has not been made may be frozen, and is revived by paying the arrears with a small penalty, as specified by the CRA and regulations.
Updating details: address, bank account, contact details and nominees can be updated through the CRA or point of presence.
Statements: the CRA issues an annual statement of transactions, and subscribers can see their holdings online at any time.
Charges: the CRA, point of presence, pension fund, custodian and NPS Trust each levy charges within the caps set by PFRDA, so the overall cost remains among the lowest for any retirement product.

⚠ Note

Under the Multiple Scheme Framework introduced from 1 October 2025, a non-government subscriber may hold several schemes under a single PRAN. The PRAN therefore remains the single identity, while the investment choices beneath it have become more varied.

⚠ Key point

Each subscriber has one lifelong, portable twelve-digit PRAN, allotted by a CRA, against which every transaction is recorded. The Tier I account is the mandatory pension account under Section 20(2): locked until exit, with partial withdrawals up to 25% of own contributions, compulsory annuity on exit, a minimum of ₹500 at opening and ₹1,000 a year, and tax benefits. The Tier II account is the optional account under Section 20(3): available only with an active Tier I, allowing withdrawal at any time, with ₹1,000 at opening, no annual minimum, and generally no tax deduction. Money may move from Tier II to Tier I but not the reverse.

7. Related Topics and Provisions

The National Pension System (Section 20)
Investment choice and minimum assured return schemes
Exit, withdrawal and annuity under the NPS
Central recordkeeping agency (Section 21)
Taxation of the NPS