You have an income source that takes care of your current expenses. But what about after you retire, and that income source is no more? What can be a hassle-free way to ensure that you still get the amount needed to continue the earlier lifestyle? The answer might just lie in making an investment in the National Pension Scheme (NPS). Here are all the details of how you can secure your future with NPS.

Why Invest in the National Pension Scheme?

There are several benefits associated with NPS when compared to other financial retirement options like fixed deposits and PPF. It can secure your future and get you a sizable retirement corpus.

Important Benefits of NPS

Here are the most important benefits of investing in NPS:

Reliable Pension Income

An effective investment delivers expected returns, and NPS lives up to this criterion. Nearly sixty per cent of returns on maturity get credited as the lump sum benefit. The rest of the corpus (forty per cent) is the component that goes towards annuity purchases. The pension income you secure as a result will support you and your family. There is also an option to choose the spouse as a nominee in case of the account holder’s demise.

Low-risk Investment Option

Funds invested in NPS remain spread across several asset classes:

●             Government Bonds and Securities

●             Alternative Investment Funds

●             Corporate Debt

●             Equity

Though equity can be volatile, all the rest are safer choices and ensure assured returns. Regardless of the asset allotment strategy chosen, the structure of NPS is such that it lets you grow the wealth from the beginning of the investment tenure such that you can conserve the accumulated corpus at retirement. The fact that NPS is under Pension Fund Regulatory, and Development Authority (PFRDA) also adds a sense of security.

Control and Customization

NPS lets you select the asset allotment strategy depending on your financial aims and risk appetite. Customizing and selecting the allotment by yourself means you have made an Active Choice. Of course, there is an upper limit for asset allocation. You can also go for Auto Choice if you are unsure about your knowledge of multiple asset classes.

Tax Benefits on Maturity and Contribution

You are eligible to claim deductions against NPS investments till INR 1.5 lakh under Section 80C of the Income Tax Act. Section 80CCD (1B) also lets you claim deductions of INR 50,000 against an NPS investment. Salaried individuals can get further deductions under Section 80CCD (2). The regular pension and the lump sum received on maturity also have tax exemptions.

Flexibility of NPS Investment

NPS is a voluntary retirement scheme that lets you modify the contribution amount as and when required, which ensures flexibility. An annual contribution of at least INR 1,000 is mandatory. There is no need to have a fixed payment date in a year because you get to decide that as well.

Will NPS Investments Cost More?

When it comes to the associated variable and fixed charges like registration costs and transaction fees, an NPS investment has the least cost when compared to other investment options globally.

Moreover, NPS is seen as one of the most affordable investment products due to the low expense ratio, particularly when you compare it with ELSS (equity-linked saving schemes) and ULIPs (unit-linked insurance plans). Even with the newly introduced charges, NPS remains cost-effective. The impact of the recently added 0.005 per cent administrative expenses is going to be marginal.

Is NPS Catering to all the Needs of the Elderly?

NPS caters to the needs of the elderly in the sense that it lets them accumulate a healthy retirement corpus that can support them for life. The exit age for the scheme has now been increased from 65 years to 70 years, which is also beneficial to earn a higher amount through investments.

Additionally, it has already been mentioned that NPS comes with the feature of letting the investor choose a nominee. Thus, even after the account holder’s demise, the future of his/her spouse remains secure.

Endnote

Thus, NPS is a good instrument to help you financially secure your future. But remember that it is always better to invest early to get a sizable amount at retirement.