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I liked the simplicity of Scott Adams' Financial Advice. So I continued reading about NPS.

What is NPS

National Pension Scheme(NPS) is a voluntary retirement solution for individuals. The individual has to contribute to their pension account while working, and during their retirement, an income will be generated from the accumulated pension corpus. At the time of retirement, you can withdraw a maximum of up to 60% of the corpus in a lump sum without tax. But for the remaining (minimum) 40%, you must purchase an annuity to pay a monthly pension. The monthly income from the annuity would be taxable based on the slab tax that would prevail then.

How does it work

As per Pension Fund Regulatory and Development Authority(PFRDA) guidelines, your contribution gets invested into Equities(top 200 stocks based on market capitalisation, max exposure to equity is 75%), Govt. Securities, Corporate Bonds and Alternate Assets are based on the following schemes to build your retirement corpus.

1. Aggressive Life Cycle Fund (with equity up to 75%)
2. Moderate Life Cycle Fund (with equity up to 50%)
3. Conservative Life Cycle Fund (with equity up to 25%)

There are two types of accounts

• Tier I
• Tier II

Features	Tier I	Tier II
Account Type	It is the Pension account. Its default	Its an optional investment account.
Contributions required to keep the account active	₹1000/year.	₹250/year.
Withdrawal	Withdrawal are restricted.	Unrestricted Withdrawals.
Tax Benefits	Applicable.	Since withdrawals are unrestricted. Tax benefits aren't applicable.

Note: You can open a Tier II account only if you have an active Tier I account.

Profession pension fund managers(SBI, UTI, HDFC, ICICI, Kotak and others) will manage the funds under both these accounts. You can switch between them once a year for Tier I and 4 per year for Tier II account.

Why

Tax benefits ~ 2 Lakh/annum.

- Your employer can contribute 10% of your salary (Basic + DA) under Section 80 CCD(2). The contribution upto up-to 7.5 Lakh is tax-free.

- ₹1,50,000 tax deduction under Section 80 CCE.

- ₹50,000 under section 80 CCD(1B) over and above ₹1.50 lakh under Sec 80 CCE.

It is a genuine long term product.

- ELSS has 3 years lock-in period.

- PPF has 15 years lock-in period.

- But with NPS, Funds within your Tier I account is locked for the longest period (60 - your age at the time of enrollment). E.g., Since it is available for an individual from the age of 18. The lock-in period would be 42 years.

- With 12% being the average 5 year CARG, Your money has the best chance to compound uninterrupted.

Lowest cost ratio

With 0.09% as the fee, NPS has the lowest cost ratio for managing funds.