NPS account.
Your NPS account is linked to your Permanent Retirement Account Number (PRAN), which belongs to you, not your employer. So, when you change jobs, your accumulated NPS corpus remains invested in your chosen asset mix, and you do not have to withdraw it.
What changes is how future contributions are made. The process depends on whether your new employer also offers Corporate NPS.
What happens to your NPS when you change jobs?
NPS is designed to be portable across employers. Your existing PRAN continues even when you move to another organisation, and the accumulated corpus remains invested.
retirement planning because employer contribution can be an important part of the overall benefit of Corporate NPS.
Your existing corpus remains invested, but unless you increase your own contribution, the amount being added to your retirement corpus each month will fall.
This is why a job change should trigger a retirement contribution review, not just a salary comparison.
Can you increase your own NPS contribution to make up for it?
Yes. If the new employer does not offer Corporate NPS, you can continue contributing to NPS yourself under the All Citizen Model.
Employees can continue making their own contributions, while the tax treatment will depend on the applicable provisions and the tax regime they have chosen, says Goel.
However, replacing an employer contribution with your own money is not necessarily a one-for-one tax-equivalent replacement.
“Under the current tax framework, employer contributions qualify for deduction under Section 80CCD(2), with the Income Tax Department currently providing a deduction limit of up to 14% of basic under the new tax regime. Under the old regime, the limit for employers other than Central/State Government employers is 10% of basic,” says Iyer.
Your own NPS contribution has different deduction rules, and the benefit also depends on whether you are under the old or new tax regime.
Therefore, if your new employer does not offer NPS, don’t simply look at the amount that has stopped. Calculate how much additional personal contribution you need to maintain your retirement target, and then check the tax benefit available to you.
What happens to the pension fund and asset allocation?
Changing employers does not automatically mean that you have to change your Pension Fund Manager (PFM) or investment strategy.
“The NPS account and PRAN remain linked to the subscriber, allowing continuity in their existing retirement investments even when they move to a new organisation,” says Goel.
However, a job change can be a good time to review your investment choices.
Your new employer may have a different approach to investment choices, depending on its Corporate NPS arrangement. Iyer recommends checking the Pension Fund and asset allocation and understanding whether these are selected by the employer or by the employee. Subscribers can subsequently change these choices within the framework permitted by PFRDA.
So, don’t assume that the investment strategy you had under your previous employer is automatically the best one for you today. Your age, years left until retirement, risk appetite and retirement target may have changed.
What should you check after switching jobs?