NPS (National Pension Scheme) – Is it worth the hype?
What is NPS?
This is a government supported pension scheme. As with other such schemes, the idea is that you contribute regular sums of money in your working years. This continues to earn returns, and is finally made available to you to take a pension / annuity when you retire. Unlike the so-called defined benefit schemes that government employees enjoyed earlier (where the pension was funded by government and was linked to seniority, last drawn pay, etc), the NPS is funded solely by your own contributions.
The genesis of the this scheme was a realisation that the Provident Fund (PF) was woefully inadequate to meet the retirement / pension needs of a vast majority of people. Two major welcome departures of the NPS from the PF are:
- It allows you the option of investing your contributions into market-linked schemes, which can earn a much higher return over the long term, compared to the government-pegged PF
- The scheme has a wider distribution network through banks
In the equity segment, NPS has given a return of 9.20% since its inception in 2009
Who can enrol for the for the National Pension Scheme?
You can enrol if you are
- A citizen of India (resident or non-resident)
- Between 18 to 60 years of age at enrolment
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