National Pension System: Who should not invest in NPS?


Before you open an NPS account and begin saving, here are some important features to stay note of. NPS is a market-linked investment that helps accumulate one’s savings towards retirement.

After opening an NPS account, one must keep saving during the ‘deferment phase’ or the ‘accumulation phase’ so start getting a pension from the ‘annuity phase ‘

For those that wish to accumulate retirement funds and acquire a hard and fast pension during their retirement years, NPS is an investment to think about.

NPS being a long-term investment, exiting from the scheme, later on, may prove detrimental while knowing how it works will facilitate you accumulate of the proper amount for retirement. Here we glance at factors that will not suit all investors.

1) Who wants to speculate 100% inequities:
NPS doesn’t have the choice to take a position 100% of your savings inequities.

Almost like mutual funds, there are fund options to decide on from in NPS but there’s an upper cap when it involves allocating funds inequities.

one is allowed to speculate one hundred pc in fund options with corporate bonds and government bonds because the underlying securities, under the equity fund option, a maximum of 75 percent of your savings is invested.

Knowing them helps to form better investment decisions supported by one’s risk profile.

2) Who doesn’t want to lock in funds for an extended period:
NPS could be a long-term savings scheme aimed specifically to make a corpus for post-retirement needs. If someone opens an NPS account at age 30, the NPS will mature when he or she is 60 and so there’s a provision of a lifetime pension.

It means the NPS account (Tier I) that you just open today could stick with you for several decades from now.

3) Who wants a lump sum on maturity:
On maturity, you can withdraw a maximum of 60 percent of corpus while the balance 40 percent will have to be transferred to a life insurance company to provide a regular pension to you.

Being a retirement-focused investment, there is a provision to get a mandatory pension in NPS, and hence 100 percent of the corpus is not allowed to be withdrawn under normal circumstances.

4)Who doesn’t wish to require tax write-off:
NPS has several tax benefits and may facilitate you bringing down the liabilities. However, if you are doing not want to require vantage or have already opted for the New Tax Regime (Section 80CCD (2) is allowed), NPS tax benefits won’t be of help to you.

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