Corporate NPS: What happens to the NPS corpus when an employee switches jobs?

New Delhi: The National Pension System (NPS) allows a person to accumulate a corpus for retirement throughout their earning life. For salaried employees, NPS has a provision for a corporate model, which includes contributions from both employers and employees. Thus, the funds of employees covered under the corporate model of NPS are linked to their employers as well.

Confusion may arise in the case of a job change. One may wonder about the future course of their NPS journey and what would happen if the new employer does not offer the option of corporate NPS.

It is thus important to know the sequence of events once a person resigns from an establishment. The Central Recordkeeping Agency (CRA) allots a Permanent Retirement Account Number (PRAN) to every NPS subscriber, which is linked to their account. PRAN helps facilitate the seamless transfer of retirement funds throughout one's employment journey without the need to switch accounts or withdraw money in the case of a job switch or a change in job sector, such as from the private sector to the government sector.

It is a unique 12-digit number provided to an NPS subscriber that ensures the smooth transfer of the retirement corpus across different establishments and sectors. Even if the subscriber changes jobs, cities, or Pension Fund Managers, the PRAN remains the same throughout their life.

Therefore, when an employee changes jobs, the accumulated funds remain invested in the same NPS account, and a new account is generally not required.

When an employee resigns, the CRA records the shift or exit, which helps detach the PRAN from the corporate registration of the previous employer. This, however, does not affect the corpus in the account.

The new organisation that the employee joins may or may not offer corporate NPS. If it does, the PRAN can be registered with the new employer, and contributions can continue from there.

However, confusion arises if the employer does not offer corporate NPS. Subscribers must not withdraw the sum in haste, since the NPS account is linked to a PRAN that belongs solely to them. Therefore, the money in the NPS account will neither disappear nor reset.

The subscriber also does not need to create a new NPS account under the All Citizens Model, as a person can have only one PRAN.

Instead, the subscriber can shift the existing NPS account from the corporate sector to the All Citizens Model, under which they may continue making independent contributions to the account. This is known as Inter-Sector Shifting (ISS), which allows an individual to shift NPS accounts from one sector to another, including the Corporate, Central Government, State Government, and All Citizens models. The PRAN remains linked to the NPS account, and the existing corpus is not affected.

Since NPS is a market-linked product and returns are generated on the available balance in the account, a change in sector or a gap in employment does not, in itself, result in the loss of the NPS amount.