Categories: Retirement Planning

A gift for retirement – National Pension Scheme

The average life expectancy has increased to 70 years, so a quick question went through my mind what if I have been gifted such a long life, shouldn’t I plan for a healthy and happy retirement? Shouldn’t I be prepared for the future?
I am pretty sure that this question might have crossed through your mind too. The answer for the same is National Pension Scheme.

What is NPS?

National Pension Scheme is a defined contribution-based Pension Scheme launched by Government of India. NPS is regulated by Pension Fund Regulatory Authority of India (PFRDA). It is a voluntary scheme for old age security.

Why should I invest in NPS?

1. Tax benefits:

Additional investment up to Rs. 50,000, is deductible from taxable income under section 80CCE over and above 1.5 lakh deduction which we get under NPS below.

2. Returns:

You can expect a return of 9% from NPS. Returns are totally dependent on the investment choice you do.

3. Source of regular income:

NPS will help you take care of your monthly expenses when you need it most.

4. Flexibility:

The amount of investment and frequency of contribution can be changed as per the subscriber requirement.

5. Portability:

NPS account remains the same irrespective of change of employment or region.

Who can invest in NPS?

A citizen of India, whether resident or non-resident can join NPS between the age group of 18 to 60 years. A pre-existing pension account holders can also apply under this scheme for fresh registration.

Types of Account under National Pension Scheme:

1. Tier I Account:

A Tier I account is mandatory to open in order to join NPS. The account has limitations on withdrawal. The subscriber needs to make a minimum contribution of INR 1,000/year. Taxation benefits can be availed on money deposited in this account.

2. Tier II Account:

This account is optional and can be opened at any point of time – at the time of opening Tier I account or later. Tier I account is compulsory for opening Tier II account.

How to open an NPS Account?

In today’s digital world where everything is available online, we are a new-age app that makes it easy to invest in mutual funds. You can directly invest through our app and it’s just a few clicks away.

Withdrawing money from NPS:

After 60 years of age, up to 60% can be redeemed lumpsum out of which 40% is tax free; the balance will be converted for pension payout.
If you want to exit before 60 years of age, then only 20% of the corpus can be withdrawn and balance to be invested for pension payout.
In case of death the subscriber, a nominee is allowed to withdraw 100% of NPS.