NPS: 5 types of pension schemes you should know about
If you’re looking for a reliable government-backed plan, National Pension System(NPS) emerges as one of the key retirement planning options that can help you achieve financial freedom post retirement. It provides 5 types of pensions.
National Pension System (NPS) is a government-backed retirement scheme that encourages investors to invest systematically during their working years for a secure financial future. An NPS account holder can start investing at 18 years and can do that up to 75 years of age. At 60 years of age, they get the option of withdrawing up to 60 per cent of their retirement corpus. But they can’t withdraw the rest 40 per cent and need to purchase an annuity plan to get a monthly pension. The return from annuity investment provides the monthly income to NPS account holders. If they want, they can purchase the annuity plan from the entire 100 per cent of their corpus. They can get 5 types of monthly NPS pensions.
NPS Tier 1 Account
NPS tier 1 is a long term investment plan that aims at building a retirement corpus, offering tax benefits to NPS account holders. Withdrawals are restricted until the retirement age of 60, making it a disciplined saving choice with a mix of equity, government bonds, and corporate debt options.
NPS Tier 2 Account
Tier 2 does not offer tax benefits but provides greater flexibility in withdrawals and investments. It allows investors to choose investment options in equities and bonds with greater liquidity.
NPS: Annuity for life with ROP (return of purchase price)
Under annuity for life option with ROP, an NPS account holder gets a monthly income throughout life. After the death of the annuitant, the money is paid to the nominee.
NPS: Annuity for life without ROP
Under this type of NPS pension, an NPS account holder gets a monthly income throughout life, but no money is paid to the nominee after the death of the annuitant.
NPS: Joint life annuity with ROP
Here, a monthly income is provided to the account holder and their spouse. On the death of the annuitant, annuity is paid to the spouse for life. The purchase price is returned to the nominee after the death of the spouse.
NPS: Joint life annuity without ROP
Under joint life annuity without ROP, monthly income is provided to the account holder and to their spouse after their death. If the spouse predeceases the annuitant, payment of the annuity will cease after the death of the annuitant.
NPS: Joint life annuity without ROP
Under joint life annuity without ROP, monthly income is provided to the account holder and to their spouse after their death. If the spouse predeceases the annuitant, payment of the annuity will cease after the death of the annuitant.
Family income with ROP
It is available for the government sector employees only. Under this, the annuitant gets annuity for life.
Family income with ROP
After the annuitant dies, the spouse gets annuity for a lifetime. After the spouse dies, the annuity goes to the living dependent mother and father of the deceased annuitant.
Family income with ROP
After all these members are covered, the annuity ceases, and the 100 per cent payment is returned to the surviving children or the legal heirs of the deceased annuitant.