The NPS or National Pension Scheme is a pension scheme backed by the government of India, and it was launched in 2004 especially for the employees serving in the government offices. However, in 2009, the scheme was opened for all. It is a voluntary savings scheme, which is specially designed to enable the workers to make systematic savings during their active work life and build a corpus fund, which they can utilise after retirement.
The scheme was introduced to encourage citizens to develop the habit of regular savings. It is an attempt by the government to find a sustainable solution of providing adequate retirement funds to every citizen of India. Under this scheme, the savings of the individuals is pooled into a pension fund, which is regulated by the Pension Fund Regulatory and Development Authority. The funds are then invested in various money market instruments like government bonds, corporate debentures, and shares by the professional fund managers as per the approved investment guidelines.
NPS offers a wide range of investment choices and PF options to the subscribers. Depending on your financial goals, you can choose to invest in various investment tools and earn reasonable returns on your investment. It is pivotal that you monitor your investments periodically and if need be switch between the investment options and grow the pension corpus.
One of the most significant benefits of NPS is that opening an NPS account is very easy. You can open an account with the unique Permanent Retirement Account Number, which is given to you when you subscribe for the scheme.
To suit the different needs of the people, the NPS is structured into two levels or tiers. The Tier-1 account is a non-withdrawable account wherein the contribution made by the subscriber is credited and invested as per their chosen fund manager. The Tier-2 account is a voluntary withdrawable account, which is allowed only if the subscriber has Tier-1 account in their name. Under this account, the subscribers can withdraw funds from their account as per their needs and as required.
Another significant advantage of NPS is portability. You can easily port your NPS account as and when you shift to a new location or change your job. This would not affect your corpus in any way.
The amount you contribute towards the NPS grows till retirement with the compounding effect. Also, the account maintenance charges are low, which means that you get the dual benefit of compounding interest and low operational cost, which in turn means larger savings.
Learn more about your Pension Plans here.
* Terms & conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
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