I liked the simplicity of Scott Adams' Financial Advice. So I continued reading about 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.
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.
There are two types of accounts
|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.
12%being the average 5 year CARG, Your money has the best chance to compound uninterrupted.
0.09%as the fee, NPS has the lowest cost ratio for managing funds.