As you can see, NPS makes for a great retirement savings scheme. It may not be the best scheme to invest in if your aim is to save for other purposes like children's education, daughter's marriage etc. For all of these needs, a PPF scores over NPS as the best investment scheme.
NPS being a long term investment, exiting from the scheme later on may prove detrimental while knowing how it works will help you accumulate the right amount for retirement. Here we look at factors that may not suit all investors. NPS does not have the option to invest 100 per cent of your savings in equities.
Returns/Interest
A portion of the NPS goes to equities (this may not offer guaranteed returns). However, it offers returns that are much higher than other traditional tax-saving investments like the PPF. This scheme has been in effect for over a decade, and so far has delivered 8% to 10% annualised returns.
The SBI Life Saral Pension Plan is an individual participating non-linked traditional pension plan which comes with Guaranteed Bones and Simple Reversionary Bonus. ... If you are looking for a good retirement plan with a regular income, this plan is a good investment.
The employees of the corporate entity, enrolled by the employer having Indian Citizenship between the age of 18-60 years and complying with the KYC norms, are eligible to be registered as subscribers under NPS. Government of India has discontinued new subscription under NPS Swavalamban with effect from 01/April/2015.
NPS is a market linked, defined contribution product. ... NPS is mandatorily applicable on Central Government employees (except Armed Forces) recruited on or after 01.01. 2004. Subsequently, all State Governments excluding West Bengal have also adopted NPS for their employees.
At the core, there is no difference between NPS for central or state government employees when compared to the NPS for public or corporate employees. ... The NPS Tier I and Tier II account structure is the same for all the entities, and so are the tax benefits on contribution as well withdrawal.
In NPS, a government employee contributes towards pension from monthly salary along with matching contribution from the employer. The funds are then invested in earmarked investment schemes through Pension Fund Managers.
Low Risk Investment
As compared to other investment options, NPS bears comparatively low risk. ... Investors, who are at the age of 50, the risk exposure is 75%, which gets decreased by 2.5% by the time one reaches the age 60%. This equity exposure provides higher-earning opportunities with a lower risk exposure.
Any Indian citizen in the age group of 18-60 can open an NPS account. NPS is administered and regulated by the Pension Fund Regulatory Authority of India (PFRDA). The NPS matures at the age of 60 but can be extended until the age of 70.
The NPS interest rate usually ranges from 9% to 12% p.a. NPS contributions toward Tier I account are subject to income tax benefits.
Pension (Annuity) payable for 5, 10, 15 or 20 years certain and thereafter as long as you are alive.
One needs to invest Rs 22000 each month to get a monthly pension of Rs 1 lakh. So, depending on your age, amount of savings, rate of return and the withdrawal rate, you can plan for getting Rs 50,000 or Rs 1 lakh or even a higher amount of lifetime pension.