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Things change with time, whether our habits, approach to life, or even jobs and businesses. As Leroy Hood rightly said, “Life is a process of evolution.” Now you do not have to work on a typewriter or exchange letters with a friend to know their whereabouts. The more you evolve with time, the more you prosper.
So, the question is, are you planning your retirement with a new pension scheme? The New Pension Scheme, officially known as the New Pension System, is a modern way to save for your retirement while you invest and save taxes. In this blog, we will differentiate between the old pension scheme and the NPS. We’ll also explore the NPS account opening procedure.
What is the National Pension System?
The National Pension System (NPS) is a voluntary retirement plan that came into existence in 2004. Earlier, it was only limited to government employees, but since 2009, it has been open to all employees and business owners. Since NPS is linked to the market, it has the potential to provide you with better returns than traditional forms of retirement plans, savings FDs, or PPFs. Now, let’s have a look at the difference between the old pension scheme and the NPS with a table.
| Old Pension Scheme | New Pension Scheme |
| This is eligible only for government employees. | Every Indian citizen is eligible between the age of 18-70 years. |
| This provides pension to government employees based on their last drawn salary. | NPS provides pension based on the investments while they work. |
| This pension is tax-free. | 60% of the NPS corpus can be withdrawn as a lump sum amount tax-free |
| There are no tax benefits in this scheme. | Subscribers can claim tax deductions under Section 80C, 80 CCD (1B), and 80CCD (2) of Income Tax Act. |
| No high returns. | NPS has the potential to provide high-returns. |
Want to know more about NPS Tier I and Tier II accounts? Read here.
NPS Account Opening Procedure
Now that we know the difference between the old pension scheme and NPS. Let’s have a look at the procedure of the NPS account opening process.
- Visit nps.kfintech.com on your laptop or mobile.
- Fill in the following details:
- Your full name
- Date of birth
- Mobile number
- PAN number
- Email ID
- Application type
- Resident type
- Agree to the terms and conditions
- Click on ‘Create an account’
Now you have an NPS account.
Conclusion
Before you choose to invest in the National Pension System it is important to set your financial goals and invest accordingly. Consider your risk tolerance, financial goals, and amount you want to invest in NPS. Although, you can start investing in NPS with ₹ 500/- per month or ₹1,000 annually, this makes NPS a lucrative option to invest and plan for retirement.
