NPS: The Key to Unlocking Cutting-Edge Retirement Prosperity

The National Pension System (NPS) has crossed ₹10 trillion in assets under management, signaling its increasing popularity and growth. The NPS is considered one of the most cost-efficient retirement planning products, combining market-linked returns with disciplined savings and the power of compounding. It has consistently delivered superior returns compared to other products, with equity schemes generating approximately 12.8% per annum and debt schemes around 9% per annum over the last 10 years. This has contributed to its growing awareness and interest among investors.

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced subscriber-friendly measures to enhance the NPS. One such measure is the systematic lump sum withdrawal (SLW), allowing the tax-free lump-sum portion of the maturity corpus to be withdrawn in regular instalments, enabling the remaining corpus to continue growing and reducing the risk of premature exhaustion.

Another recent development is the enhanced flexibility for subscribers to choose different pension fund managers for each asset class, enabling them to allocate their corpus to selected fund managers accordingly. Additionally, the regulator is working on designing a guaranteed returns feature within NPS, catering to subscribers seeking a certain level of guarantee in their retirement savings.

The NPS also retains tax benefits, with the option of choosing the old tax regime and claiming exclusive tax exemptions available for NPS contributions. However, investors are encouraged to look beyond tax benefits and understand the need for building a sizeable corpus for retirement, considering features such as flexibility of asset allocation, easy contributions through SIP feature, portability of the account, and digital processes.

While the product emphasizes the importance of a long-term, locked-in retirement savings approach, it also offers features for partial premature withdrawals. Overall, the NPS continues to evolve and improve, providing investors with a comprehensive and sustainable retirement planning option.