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The National Pension System (NPS) is a pension scheme introduced by the Government of India to encourage citizens to build a retirement fund. Initially meant exclusively for government employees, the scheme had more than 5.2 crore subscribers as of March 2022, according to the latest data from the Pension Fund Regulatory and Development Authority.
You can also invest in NPS and build a retirement fund. However, before that, you must learn everything there is about NPS. This article can help you with the major details you need to know about NPS.
National Pension System (NPS) is a pension-cum-retirement scheme designed and managed by the Pension Fund Regulatory and Development Authority (PFRDA) under the purview of the Central Government. The system allows individuals to build a retirement scheme by slowly investing money every month. The scheme is voluntary to the common public and is open to employees of all sectors.
You can start by investing as little as ₹500 and build a wealth corpus. 60% of your invested sum and the returns can be availed when you turn 60, with the rest distributed as a monthly pension.
Unlike other pension schemes, NPS gives you the option to choose how your money should be invested. According to your choice, the money you invest in NPS is used to buy different types of assets. Therefore, NPS has similarities to a mutual fund. NPS also has a fund manager who creates and manages the fund. You can choose a fund according to your risk appetite.
For instance, if you are a risk-averse investor, you could choose a fund with less equity exposure. The selection has some limitations according to your age as well. It is implemented to minimise risk, especially when closer to your retirement.
There are two types of accounts you can open in NPS. Tier 1 is default and is needed to open a tier 2 account. Tier 1 account is your default pension account, and it has a lock-in period that runs until you are 60. Investing in the tier 1 account is popular because it comes with tax benefits.
Tier 2 account, meanwhile, is optional. It is for those who want the benefits of NPS without the lock-in period. Hence, money can be withdrawn at any point. However, tier 2 NPS accounts do not offer any tax benefits.
One of the most significant advantages of the scheme is that it lets you start small.
Let's discuss some of the top advantages of NPS:
A new NPS account can be opened online in less than an hour. Visit enps.nsdl.com and start a new registration. Keep your PAN card and Aadhaar card ready for a seamless experience. Also, ensure your mobile number is registered with Aadhaar, as you will receive an OTP for authentication.
The earlier you start building your retirement fund, the more it can grow. Opening an NPS account is straightforward, so you can get started whenever you are ready to up your investment game!
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.