Plan your golden years with the National Pension System 

Most of us plan for tomorrow. Whether we work in the office or do household chores, planning is essential to our daily routine. How do we plan our retirement? Here NPS or The National Pension System, will come into the picture.

The National Pension System: Overview

As mentioned above, it is initiated by the central government to provide social security to individuals. It is a pension scheme that is open to all employees from the public, private, and organized sectors, although people from the armed forces are not allowed to invest in this pension scheme. The main aim of this scheme is to encourage people to invest and plan for their golden years. They need to invest in this pension account at regular intervals during their working years. After retirement, they can take out a certain amount of the corpus, and the rest will be used to get a monthly pension.

Earlier, this pension scheme was only available to central government employees, but PFRDA has made it accessible to all Indian citizens voluntarily.  

Characteristics of the National Pension System

Here are some of the main characteristics of the NPS:

• Flexible Scheme: A subscriber can continue to save for his/her retirement even if the job changes.
• Diverse Scheme: NPS invests in a mix of equities, corporate bonds, government securities, and AIFs. It gives subscribers an advantage in allocating assets according to their investment goals or risks.
• Fund Management: Contributions towards NPS are managed by pension fund managers. It has a more professional fund management system.
• Low-cost Scheme: Any Indian citizen can start investing in NPS with a minimum of ₹500. It makes one an attractive low-cost retirement planning scheme.
• Potential for high returns: NPS provides market-linked returns and can provide higher returns than any traditional scheme such as FD or PPF.
• Nominee facility: In the event of any tragedy, the subscriber’s nominee will receive the accumulated corpus. This is another feature of this retirement plan.
• Regulated Scheme: NPS is regulated by PFRDA (Pension Fund Regulatory and Development Authority). It maintains the transparency of the NPS and also protects the interests of subscribers.

Are you wondering how to start investing in NPS? Click here.

Benefits of the National Pension System

NPS offers many benefits, such as market-linked returns, tax advantages, and pension benefits. Let’s look at them briefly.

• Tax benefits: Contributions towards NPS receive tax benefits of ₹1.5 lakh under Section 80(C) of the Income Tax Act and there is another additional benefit of ₹50,000 under Section 80CCD 1(B). Upon retirement, a subscriber will receive a tax-free 60% of the accumulated corpus.
• Pension Benefits: The subscriber will receive 60% of his/her accumulated corpus, and the rest 40% must be used to buy an annuity, which provides regular pension income.
• Track performance: The subscribers will receive regular account statements, which will help them track their investments and returns.
• Market-linked returns: NPS has the potential to give subscribers better returns on investment as it provides market-linked returns.

Conclusion

The National Pension System can be an attractive option to plan your retirement. From providing market-linked returns to flexibility and affordability, NPS has become one of the preferred choices for retirement plans.