Imagine you are visiting a local cuisine marketplace, where you find a dazzling array of food choices and flavors for you to choose from. Won’t that make your experience much more rich and satisfying? Similarly, to make your investment experience rich and diverse, the National Pension System (NPS) is now offering a variety of choices for your retirement planning. 

In the ever-evolving landscape of financial planning, the National Pension System (NPS) in India has introduced a unique concept – the ability to choose multiple Pension Fund Managers (PFM) for your retirement savings. This approach will provide individuals with more choices and flexibility to manage their retirement savings. 

What is Changing?

Earlier, all NPS scheme subscribers had to choose only one PFM across all the asset classes. However, now subscribers can choose up to 3 PFM, one for each of the asset classes. This ensures that you get to choose the expert PFM for each of the asset classes, thereby improving the possibility of better returns. This latest update of the new pension scheme is available in Active Choice in Scheme Preference. 

In the case of NPS Tier-I accounts, subscribers can select different PFM for different asset classes. 

• PFM 1 for Equity Scheme (E)
• PFM 2 for Corporate Scheme (C)
• PFM 3 Government Scheme (G)
• For Scheme Alternate Investment (A), NPS subscribers can choose only one PFM out of the PFMs opted in asset classes E, C, and G. 

In the case of NPS Tier-II accounts, subscribers can select another 3 different PFM.

• PFM 4 for Equity Scheme (E)
• PFM 5 for Corporate Scheme (C)
• PFM 6 Government Scheme (G)

Benefits of having multiple PFMs in the NPS scheme

1. Diversification for Safer Returns

Multiple PFMs who are experts in each of their asset classes offer a range of investment options, allowing national pension system subscribers to diversify their retirement portfolios. This helps to reduce the risk concentration and potentially improve returns.

2. Tailored Choices for Every Investor

Subscribers can select a PFM that aligns with their risk tolerance, investment goals, and preferences. Different PFMs may excel in various asset classes, such as equities, bonds, or government securities. This will help them to design a better investment strategy.

3. Flexibility to Customise

Subscribers can switch between PFMs or investment schemes within the NPS scheme to adapt to changing financial circumstances or goals. This flexibility allows for better customization of retirement planning.

4. Performance Comparison

Multiple PFMs allow subscribers to compare the performance of their chosen PFM with others. This helps them to make data-driven investment choices and hold PFMs accountable for their performance.

5. Exit Options

In case an NPS subscriber is dissatisfied with the performance of their chosen PFM, they have the option to switch to another PFM, providing an exit strategy. This ensures satisfaction for them as their investments are in the hands of more capable PFMs. 

Points to be noted

• Selection of Multiple PFM in an NPS Tier-I account is applicable to subscribers mapped under the Corporate Sector and All Citizen of India (AL) excluding the State Government.
• In the case of an NPS Tier-II account, it is applicable for all subscribers under any sector.
• The Percentage Contribution cannot exceed 100%.
• An NPS subscriber has the option to change the Pension Fund Manager. At present, the subscriber can change the Pension Fund Manager once in a Financial Year.
• NPS subscribers can change their asset allocation four times during a financial year.

Conclusion

The introduction of Multiple Pension Fund Managers in India’s National Pension System is a game-changer for retirement planning. Overall, multiple PFMs in the new pension scheme aim to empower individuals with greater control over their retirement savings, enabling them to make choices that suit their financial goals and risk preferences.

To learn more about how you can choose PFMs within the National Pension System also know as National Pension Scheme, visit our dedicated NPS platform.

Have you ever noticed the fascinating world of ants, where strategic planning and survival instincts reign supreme? As the summer sun graces the land, these diligent creatures gather their precious sustenance, ensuring a bountiful supply for the unforgiving winter months. By wisely stockpiling their provisions, they cleverly avoid the perils of the harsh climate, safeguarding their lives and securing their future. Are you wondering now how you would secure your future after retirement? Let’s explore it.

The NPS, or National Pension System, also known as the National Pension Scheme, is a voluntary retirement plan designed to empower you in creating a retirement corpus. This is not all; there are numerous NPS tax benefits.

Let’s have a look at NPS tax benefits

NPS Tax treatment at maturity

Although NPS benefits can reduce taxes during the accumulation phase, it’s critical to comprehend how taxes are handled when an NPS matures:

Lumpsum withdrawal: 60% of your NPS corpus is tax-free when you choose to withdraw it at maturity. At the time of purchase, the remaining 40% of the annuity is also tax-exempt, but the pension you receive from it is subject to tax based on your applicable tax bracket.

Annuity payout: Your periodic annuity pension is regarded as part of your income and is taxed accordingly. The tax impact may be manageable, though, because this income is typically received in retirement, when your overall income may be lower.

Conclusion

Anyone who wants to start planning for retirement early and has a low tolerance for risk should consider the NPS. It goes without saying that having a steady pension (income) in your golden years will be a blessing, especially for those who leave private-sector employment. As an NPS subscriber, you can avail yourself of many tax benefits while investing. All you need to do is plan your retirement and set financial goals. NPS tax deductions can help you in your second innings towards a financially secure future