National Pension Scheme

NPS is structured into two tiers

• Tier I Account

  This is the primary retirement account with restrictions on withdrawals. It offers tax benefits under Section 80C and Section 80CCD(1B) of the Income Tax Act.

• Tier II Account

  This is a voluntary savings account without any withdrawal restrictions. However, it does not offer any tax benefits.

Investment Options Available

NPS offers a variety of options, providing flexibility to investors to choose according to their risk appetite and investment preferences.

• Asset Classes

  There are asset classes available for investment, namely, (i) Equity (E), (ii) Corporate Bonds (C), (iii) Government Bonds (G), and (iv) Alternative Investment Funds (A), which may include REITs InvITs.

• Investment Choices

  • Active Choice

    Allows investors to decide the allocation percentages among the different asset classes (E, C, G, A) based on their risk preference.

  • Auto Choice

    Also known as the lifecycle fund, this option automatically allocates funds among different asset classes based on the subscriber's age. The allocation to equity decreases with advancing age, thus reducing risk as the retirement date approaches.

• Pension Fund Managers (PFMs):

  Subscribers can choose from a list of authorised PFMs who manage the investments. The PFMs are responsible for investing the contributions in various asset classes as per the chosen investment option and generating returns.

NPS is a market-linked product where you can invest in a mix of different asset classes. Once you decide on the asset mix and fund manager, the money is invested in specific schemes investing in the chosen asset classes.

Why Invest in NPS?

The National Pension System offers multiple compelling reasons for consideration as a key component of retirement planning

• Tax Benefits:

  Contributions made to the NPS are eligible for tax deductions under Section 80C (up to ₹1.5 lakh) and an additional deduction under Section 80CCD(1B) (up to ₹50,000), making it an attractive tax-saving investment.

• Flexibility:

  NPS provides flexibility in terms of investment choices and options to switch between different asset classes and fund managers, allowing subscribers to optimise their portfolios based on market conditions and personal preferences.

• Low Cost:

  NPS is known for its low investment management cost, making it a cost-effective way to accumulate a retirement corpus over the long term.

• Transparency:

  Regular disclosure of portfolio performance and periodic statements provide transparency to subscribers, helping them to stay informed about their investments.

• Portability:

  NPS accounts are portable across jobs and locations, ensuring continuity of investment irrespective of employment changes or geographic relocations.

• Regulated Framework:

  The scheme is regulated by the PFRDA, ensuring a robust regulatory framework that governs the operations, management, and safety of the investments.

• Annuity Option:

  Upon retirement, subscribers can choose from various annuity service providers to receive a regular pension, ensuring a steady income stream post-retirement.

Who should consider investing in NPS?

NPS is open to an Indian citizen, resident, or non-resident Indian (NRI) aged between 18 and 70 years. It is suitable for a wide range of individuals looking to secure their financial future post-retirement

• Professionals

  arly starters can benefit from the power of compounding over the long term. Starting early, one can allocate more to equity. Those in their mid-career stages can balance their portfolios with a mix of equities and bonds, optimising growth potential while managing risk.

• Risk-Averse Investors

  Individuals with a low-risk appetite can benefit from the low-risk asset classes ensuring stable and predictable returns.

• Self-Employed Individuals & Employees

  NPS offers a retirement savings option for self-employed professionals who may not have access to employer-sponsored retirement plans. NPS is also suitable for employees from both organised and unorganised sectors, providing them with a structured retirement savings plan.

• Individuals Seeking Tax Benefits

  With significant tax deductions available, NPS is an attractive investment for individuals looking to minimise their tax liabilities.

• Long-Term Investors

  Investors with a long-term horizon aiming for a substantial retirement corpus can benefit from the disciplined savings approach and market-linked returns of NPS.