How do NPS benefits and features help in retirement planning? Read in the blog.

The National Pension System is a retirement benefits scheme introduced by the Government of India in 2004. Earlier, it was only introduced for government employees, but in 2009, it was made available for every citizen of India between the ages of 18 and 60. One of the key features of NPS is that it provides financial security to its subscribers in their golden years. What are the major NPS features, and how can they benefit its subscribers? We’ll explore it in this blog.

National Pension System – An Overview

NPS is a voluntary retirement scheme that aims to provide financial security during retirement years. It is based on a unique Permanent Retirement Account Number (PRAN) that is allotted to every subscriber. NPS is monitored by PFRDA to maintain its transparency. Let’s explore NPS features and benefits. 

National Pension System – Features & Benefits

1. Regulated – NPS is regulated by PFRDA (Pension Fund and Regulatory Development Authority). It maintains the transparency and gives a sense of security to the subscribers.
2. Flexible – NPS subscribers can choose how much they want to contribute. They can choose between ‘Active’ and ‘Auto’ to manage their approach based on their risk appetite and age. 
3. Portable – Change in job, location, or place won’t affect the NPS contributions. Subscribers can continue with their respective contributions if there is any change in place, job, or location. 
4. Diversification – NPS invests in various asset classes such as equities, government securities, government bonds, and alternative investment funds. 
5. Potential Returns – When compared to other retirement options such as FD or PPFs, NPS has the potential to provide better returns. 
6. Fund Management – If any subscriber wants to change their fund manager, then they have the leverage to choose from various fund managers. 
7. Tax Benefits –  An NPS subscriber can save up to ₹1.5 lakhs under Section 80 (C) and ₹50,000 under Section 80CCD (1B), that is over and above the Section 80 (C).  
8. Low Cost Investment – Any Indian citizen between the ages of 18 and 60 can open an NPS Tier 1 account with ₹500 only. This is one of the key advantages of the NPS. 
9. NPS Tier II – An investor can open an NPS Tier II account to invest just like mutual funds. They can invest in various asset classes and withdraw the amount anytime they want. 
10. Compounding – NPS subscribers can also get the benefit of compounding. As there are only partial withdrawals available in the NPS Tier I account, hence there can be a large corpus accumulated to get the benefit of compounding. 

Click here to learn about NPS annuities and how they can help you plan your retirement.

Final Thoughts

The National Pension System has been gaining popularity among Indian audiences thanks to its features and benefits. With the advantages of regulation, compounding, and tax deduction, NPS can be a vital tool to safeguard retirement finances. It is advisable to consult a financial advisor before starting an NPS journey.