NPS: 6 reasons why this pension scheme may be an excellent investment choice for your retirement needs
As we celebrate NPS Diwas today (October 1) to promote retirement planning, the initiative emphasizes the importance of securing one’s financial future through informed investment decisions. So, if you are still unversed about the financial instrument that can offer extreme financial ease during your sunset years.
With increasing life expectancy, planning for a sufficient retirement corpus has never been more crucial. NPS Diwas serves as a reminder for individuals to take proactive steps towards a secure and comfortable retirement by leveraging the benefits of the National Pension System.
Here are listed its benefits in brief:
NPS benefits: Offers a tool providing financial security at retirement
The long-term investment helps in securing your future. In the words of Kurian Jose, CEO of Tata Pension Managemen, NPS offers a unique combination of flexibility, low cost, and the potential for higher returns.
Benefit of NPS: Dual advantage of market linked returns plus pension
The NPS offers the dual advantage of market-linked returns together with the pension at retirement.
Benefits of NPS: Professionally managed
The investment instrument is professionally managed by Pension Fund Managers (PFMs), ensuring a disciplined and structured investment approach.
Benefits of NPS: Compounding benefit
The power of compounding plays a significant role, making even small, consistent contributions grow exponentially over time.
Benefits of NPS: Guarantees tax benefit
The scheme offers tax benefit under both new tax regime and old tax regime. In the new tax regime, under Section 80CCD(2), up to 10 per cent of the employee's basic salary put in NPS is tax-free. Additionally, tax deduction up to Rs 50,000 under section 80 CCD(1B) over and above the overall ceiling of Rs 1.50 lakh under Sec 80 CCE.
Benefit of NPS: Flexibility to construct portfolio based on ones risk tolerance
Additionally, NPS offers flexibility in choosing asset classes, enabling investors to tailor their portfolios to their risk tolerance.
NPS Vatsalya
Recently understanding the advantage of early financial planning, the centre has introduced NPS Vatsalya which can be opened for a new born. Samir Shah, Head- Online Business, Axis Securities said NPS can be chose if the aim is to build wealth for a child's future, the NPS Vatsalya scheme might be more suitable. This scheme offers the potential for higher returns by allowing investments in equities and is open to all genders. However, full withdrawal isn't permitted under NPS Vatsalya, with only partial withdrawals based on contributions allowed. Additionally, premature withdrawal from NPS Vatsalya is capped at 20 per cent of the corpus, which may restrict the amount available for immediate needs.