Pausing NPS? Know the impact before you stop

Pausing contributions to your National Pension System (NPS) account is possible when finances are tight or due to life events. Stopping contributions, however, does not withdraw your existing savings or halt growth. Instead, the accumulated corpus continues to be invested in chosen funds and asset classes, earning market-linked returns. The value of the corpus may rise or fall depending on market performance.

A break in contributions can have a substantial impact on the final retirement corpus, especially over long periods. For instance, a five-year pause might reduce the corpus by approximately ₹1.3 crore compared to uninterrupted contributions. This occurs because the missed contributions also miss out on years of compounding growth.

To reactivate the account, a minimum contribution is required. If contributions are not made for four consecutive quarters, the account can become dormant. However, a fresh contribution can restore its active status. Pausing contributions does not affect the tax benefits received or the tax deductibility of contributions made during the current tax year. Employer contributions to NPS continue even if an individual stops making additional contributions.

When resuming contributions after a break, it is advisable not to immediately replace all missed amounts. Instead, focus on restarting regular saving first and then gradually increasing contributions as financial circumstances improve.