Retirement Products and Solutions
This domain tests product mechanics across India's retirement ecosystem: NPS, EPF/EPS, PPF, APY, annuities, superannuation, and mutual funds. You must know eligibility, contribution rules, lock-ins, exit rules, and taxation at the product level.
Core rules and concepts
- NPS Tier I: long-term retirement account; Tier II is a voluntary withdrawable account. At 60, at least 40% of the corpus must buy an annuity and up to 60% may be withdrawn as lump sum. If the corpus is ₹5 lakh or less, full withdrawal is allowed. Premature exit generally requires 80% annuity and permits 20% lump sum; a corpus of ₹2.5 lakh or less can be withdrawn fully.
- EPF/EPS: employee contributes 12% of basic plus DA; employer contributes 12%, of which 8.33% goes to EPS subject to the wage ceiling. EPS pension requires at least 10 years of service and is payable from 58.
- PPF: 15-year maturity, extendable in 5-year blocks; EEE tax treatment.
- APY: entry age 18–40; pension of ₹1,000–₹5,000 from 60; government co-contribution for eligible non-EPFO/ESIC subscribers.
- Annuities: IRDAI-regulated; immediate or deferred; life, joint-life, and return-of-purchase-price variants. Annuity income is taxable.
Worked example
A subscriber retires at 60 with an NPS corpus of ₹1 crore. The minimum annuity purchase is ₹40 lakh; the maximum lump sum is ₹60 lakh. At a 6% annuity rate, the ₹40 lakh purchase produces about ₹2.4 lakh a year, taxed as salary. The ₹60 lakh lump sum is exempt under Section 10(12A). If the corpus were ₹4 lakh, full withdrawal would be allowed without an annuity purchase.
Traps that cost marks
Assuming NPS allows 100% withdrawal at 60; confusing EPF and EPS; ignoring the APY age band; assuming annuity rates are fixed; and forgetting that PPF extension is optional and block-based.