The National Pension Scheme (NPS), suggestive of its name, is a pension scheme launched by the government of India which promises a financially secure life post-retirement. This scheme works as a pension and investment plan which provides you income alongside market-based returns, thus adding up to your wealth which you have been trying to save up for old age.
The scheme was introduced in May 2009 and was looked at as a method which could deal with the problems of the economically backward — to provide them an option to support themselves in their old age. It is available for all citizens of India who are between 18 to 65 years of age. This open initiative by the government is applicable for people employed in both the public and private sectors, and also for self-employed people.
Benefits of NPS
An NPS account carries several benefits with itself. One of the most essential NPS benefits is its tax-saving features. People who have access to NPS can claim tax benefits under Section 80CCD (1B) of the Income Tax Act, where they are allowed an additional deduction of Rs 50,000.
An NPS scheme comes with much portability, which means that it can be tracked anywhere on the go. With online connectivity, NPS becomes easier to manage if someone moves cities or changes jobs — and NPS benefit which allows all the information around it can be accessed at the tip of one’s fingertips.
Besides, the money you invest in NPS is quite safe. Your NPS savings on Finserv MARKETS regulated by the Pension Fund Regulatory and Development Authority (PFRDA), which means that your money is in safe and reliable hands.
Who is NPS for?
The NPS suits the investment style of those who are looking forward to saving up for their retirement but are not too familiar or comfortable with making decisions around investments on their own. If you have to invest for your retirement, you will need to acquire proper asset allocation schemes — select the right products and schemes that do not turn out to be volatile with the market. NPS is a simple tool for anyone who does not want to manage their portfolio actively. People who receive NPS benefits also get to change the entire pension scheme by accessing their fund manager.
Can NPS be a safety net?
NPS can indeed be a safety net for many. However, a broader penetration to such a scheme is required. People who already fall in the lowest income brackets are quite wary of their money going anywhere. It is vital that the government increases trust between itself and the citizens, and make them see the long term benefits that a program like NPS might hold for them.
With the increase in per capita income, the scope for investment can see new opportunities too. However, growth in per capita income in India must take place with the growth of every section of Indian society. A balanced growth will have a more balanced per capita growth — more options for individuals to invest in plans and schemes that can guarantee them a better and economically sound future when they retire or are no longer able to work.
Considering that NPS is a relatively safer mode of investment, it can indeed become a favorite among the citizens. NPS scheme holders get the flexibility of managing their asset allocation while having invested in the scheme. They can access the fund manager themselves and change the way their plan had been operating. However, such flexibility can only be understood by individuals who can read and write, so it is important that education and skill training become the primary focus of the government for imparting long-term benefits for the citizens.
Opening an NPS account is an easy process — a four-step process where you have to provide the investment account, complete your payment, provide details for the KYC process, and finally get your unique Permanent Retirement Account Number (PRAN) which states that the NPS scheme has been opened for you. The entire process is paperless, fast, and hassle-free, and does not require you to visit any bank branch.
NPS accounts on Finserv MARKETS also come with 100 percent transparency. There are no hidden charges so you know what you are investing in — all the details about the investment is provided upfront to you.
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