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When you plan for retirement, one thing comes to mind: pension. It is always better to plan your life and your retirement. The National Pension System, or NPS, has become an attractive option for individuals looking to secure their golden years financially. The NPS pension plan has many benefits, and we’ll discuss why you should consider it while planning for retirement.
What is the National Pension System?
NPS was introduced by the Government of India for individuals who were planning to secure their retirement years. It is a voluntary low-investment retirement plan that is regulated by PFRDA (Public Fund Regulatory and Development Authority), a government entity that maintains transparency and protects the interests of its subscribers.
It is available for all Indian citizens between the ages of 18 and 70, respectively. Additionally, it is open to public, private, and unorganized sector employees also. The NPS pension plan enables subscribers to withdraw 60% of their accumulated amount at maturity (on retirement), and the remaining 40% will be used to purchase the annuity, which they will receive as a monthly pension.
Why should you consider NPS as your pension plan?
- Retirement Planning: NPS acts as financial security. It helps you to create a retirement corpus that can help you achieve your goals during your retirement years.
- Tax Benefits: NPS offers tax benefits under various sections. A subscriber can save up to ₹1.5 lakh under Income Tax Section 80 (C). Additionally, there is a ₹50,000 tax deduction under Section 80CCD 1(B) exclusive for NPS.
- Disciplined Approach: A subscriber needs to be consistent while he invests for the future. The more he invests, the more he generates potential returns after retirement.
- Diversification: NPS invests in different asset classes such as equity, corporate bonds, government securities, and AIFs. It minimizes the potential risk that a subscriber may face in the future.
- Professional Fund Management: NPS investments are managed by professional fund managers. They have the experience and expertise to ensure optimized returns.
- Low investment: Anyone can open an NPS account with ₹500 and a subscriber only needs to invest ₹1000 annually to keep the account active. Moreover, NPS also has a lower management fee compared to other investment options.
- Flexibility: The NPS pension plan offers flexibility in investment choices. A subscriber can adjust his asset allocation depending on the amount of risk he is willing to take.
- Portable: When a subscriber’s job or location changes, it won’t hamper his NPS investments. He can manage his NPS account as he was doing so earlier.
- Regulatory: NPS is regulated by the Pension NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), ensuring transparency and security.
- Long-term wealth creation: NPS helps subscribers create a financial corpus in the long term, providing a steady income stream during retirement.
How can the NPS calculator be beneficial to your retirement planning? Click here to know.
Conclusion
To conclude, NPS can be an attractive retirement planning option for individuals who look for financial security in their golden years. With its low investment requirements, tax benefits, diversification, professional fund management, regulatory compliance, and long-term wealth creation, the NPS provides a comprehensive solution for accumulating a retirement corpus. This can be the reason why NPS is an ideal choice for investors looking to plan their retirement effectively.
