National Pension Scheme

National Pension System is a voluntary, defined contribution retirement savings scheme designed to enable the subscribers to make optimum decisions regarding their future through systematic savings during their working life. NPS seeks to inculcate the habit of saving for retirement amongst the citizens. It is an attempt towards finding a sustainable solution to the problem of providing adequate retirement income to every citizen of India.

Under NPS, individual savings are pooled in to a pension fund which are invested by PFRDA regulated professional fund managers as per the approved investment guidelines in to the diversified portfolios comprising of Government Bonds, Bills, Corporate Debentures and Shares. These contributions would grow and accumulate over the years, depending on the returns earned on the investment made.

At the time of normal exit from NPS, the subscribers may use the accumulated pension wealth under the scheme to purchase a life annuity from a PFRDA empanelled Life Insurance Company apart from withdrawing a part of the accumulated pension wealth as lump-sum, if they choose so.

NPS has been mandated for Central Government employees of India since 2004 and it became available for private employees since 2014.

  • Employee starts investing in NPS directly and through the employer.
  • Gets back up to 60% on exit at 60 years (tax free)
  • Start getting the balance as monthly pension.
  • In case of Death, nominee can claim the corpus

We believe the awareness on NPS is still fairly low and is underpenetrated with 1.7 crores subscribers. There is a lot of scope for SMEs to adopt and spread the benefit as it is

  • One of best in class across the world
  • Reliability built with PFRDA
  • Fully portable during job switches
  • Flexible withdrawal options
  • Triple Tax benefit

But the biggest advantage is the lower cost structure. NPS has lower management fee compared to most other financial instruments and thus, other things constant, NPS is likely to give better returns with the most Tax benefits

Fund Management fees

Mutual Funds (Large Cap - Equity)

Direct Plan 1.1%
Regular Plan 2.12 %

National Pension Scheme (NPS)

Up to Rs. 10K crore 0.09%
Rs.10 K to Rs. 50K crore 0.06%
Rs. 50K to Rs. 150 K crore 0.05%
More than Rs. 1,50,K crore 0.03%
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