Is it beneficial to invest in NPS?

Initiated by the Government of India, the National Pension Scheme (NPS) is the best retirement savings plan in the country owing to its reliability, low cost structure, tax benefits, flexibility and good returns. 

NPS has the lowest maintenance cost compared to similar pension plans anywhere in the world. The advantages of low maintenance costs and the power of compounding returns help subscribers accumulate a healthy corpus for retirement.

In the age of rising healthcare costs, inflation, uncertain economic conditions and increasing life expectancy, creating a substantial retirement corpus and regular monthly pension is very crucial. Retirement savings and pension plans are especially important for salaried individuals in the private sector as they are not eligible for monthly pension from their employer.

 

Benefits of NPS account

 

Flexibility

The National Pension Scheme offers four types of investment options, including equities, government securities, corporate debt and alternate assets. You also have the choice to switch between 8 pension funds or pension fund managers if not satisfied with the funds’ performance.

Higher returns

Pension funds registered under the PFRDA for NPS subscribers have generated very good returns over the last five years; upwards of 18% per annum. High returns coupled with low maintenance costs makes NPS a very lucrative investment for retirement. Apart from that, the government now allows up to 75% of contribution for equity allocation. This has provided subscribers an amazing opportunity to earn even higher returns.

Simplicity

Opening an operating an NPS account is fast, simple and transparent. You are allotted a unique Permanent Retirement Account Number (PRAN) after opening the account for easy online tracking of your retirement fund. You just need to login with your user id and password to monitor your NPS account, make withdrawals, or switch between funds and fund managers.

At Finserv MARKETS, you can open a NPS account in just a few minutes. You just need to upload a few KYC documents and provide your phone, email id and bank details.

Reliable

Since the NPS is sponsored by the Government of India and regulated by the PFRDA, it has transparent investment norms and the pension funds are regularly monitored and reviewed by the NPS Trust.

Low maintenance costs

Maintenance of NPS account is the lowest compared to similar pension products worldwide. Account maintenance costs over a span of 25-30 years can shave off a considerable amount of money from your retirement fund. NPS’ low account maintenance costs help you build a substantial retirement corpus in the long-term.

Portability

You can continue your NPS account even after you change jobs. Contributions to your PRAN can be continued without opening a new NPS account even if you change your employer or location.

Tax benefits

Under Section 80CCD (1B), salaried and self-employed taxpayers can get a deduction of up to Rs. 50,000 in a financial year, provided they have invested in a Tier 1 account. This deduction is over and above Rs. 1.5 lakh tax relief allowed under Section 80C.

To avail maximum tax benefit, subscribers can contribute Rs. 50,000 on their own towards NPS and also contribute 10% of their basic salary plus DA through their employer towards Corporate NPS.

Recently, the government has allowed 60% of NPS corpus to be tax free from the previous 40% tax exemption. This has also considerably lessened the tax burden of subscribers.

 

NPS vs. PPF

 

Apart from knowing about the benefits, it’s important to understand how NPS scores over Public Provident Fund (PPF) investment. Below is a comparison of the two investment instruments as a long-term savings tool based on two important parameters: Returns and flexibility.

Returns

The National Pension Scheme (NPS) offers better returns compared to PPF. Though PPF provides fixed returns as stipulated by the government every quarter, it has only provided a maximum return of 8.8% per annum during a single quarter over a 10-year period. Currently, for the July-September 2019 quarter, the government has set the rate of interest to only 7.9% for PPF.

Comparatively, some NPS Pension Funds have been generating returns of more than 18% over a 5-year period. To put it simply, NPS has been generating double the returns offered by PPF.

Flexibility

As a NPS subscriber, you have the flexibility to change your investment options such as increasing your equity allocation to up to 75% for higher returns. In case, you want to stay conservative and take less risks you can reduce your exposure to equities and focus more on government securities and corporate bonds. NPS also allows you switch your Pension Fund Manager, if you are not getting expected returns.

Though both NPS and PPF are market-linked, PPF subscribers don’t enjoy the investment flexibility enjoyed by NPS subscribers. Compared to 75% equity exposure in NPS, you can only have 15% equity exposure with PPF.

 

How to open an NPS account at Finserv MARKETS

 

The PFRDA has eased the process of opening an NPS account online. At Finserv MARKETS, NPS account opening is fast and easy. To open an NPS account online, you need a mobile number, email id and your bank account details.

Finserv MARKETS is authorized by the PFRDA as a POP to facilitate the opening and operation of online NPS accounts.

Please follow the below steps to open an NPS account with Finserv MARKETS:

  • Click Apply, and enter your mobile number

  • Enter the OTP sent to your mobile number to login to the site

  • Enter your personal and net banking details

  • Select portfolio allocation among the four available funds

  • Provide nominee details

  • Upload a cancelled cheque of the bank account you have provided above

  • Upload your photograph, KYC documents and specimen signature

  • Make your first NPS payment

Upon successful completion, you will be provided with your Permanent Retirement Account Number (PRAN). You can also track the status of your PRAN application by accessing NSDL-CRA website using the 17 digit receipt number. Once the PRAN is generated, you will receive email and SMS alerts to your registered number and email id.

At Finserv MARKETS, you are assured of 100% transparency with your NPS account from entry to exit day. A NPS account with Finserv MARKETS helps you fulfil your dream of living a comfortable retirement life with high returns, host of tax benefits and regular income.

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