NPS (National Pension System)

The National Pension System (NPS) is a government-backed voluntary retirement savings scheme designed to help you secure a financially stable future. It's a versatile tool that empowers you to plan for your retirement with flexibility and potential for significant returns.

How it Works:

Regular Contributions: Make regular or one-time contributions to your NPS account.
Investment Choice: Select from various investment options, including equities, government bonds, and corporate bonds, based on your risk appetite.
Professional Management: Your funds are managed by experienced fund managers.
Retirement: A portion of your accumulated corpus is used to purchase an annuity, providing you with a regular pension income.

Key Benefits of NPS:

Tax Advantages: Enjoy tax benefits on contributions and returns.
Diversification: Spread your investments across various asset classes to mitigate risk.
Portability: Carry your NPS account across different jobs and locations.
Government Backing: Benefit from the government's oversight and regulation.
Market-Linked Returns: Potential for higher returns through investments in equities and other market-linked instruments.

Tier I and Tier II Accounts

Tier I Account: The core retirement account, offering tax benefits under Section 80C and 80CCD(1B) of the Income Tax Act. Withdrawals are restricted, ensuring long-term savings.

Tier II Account: A voluntary savings account with no withdrawal restrictions. It doesn't offer tax benefits but provides flexibility for additional savings.

Pension Fund Managers (PFMs)

You can choose from a list of authorised PFMs to manage your investments. These professionals invest your contributions in various asset classes as per your chosen investment option.

Investment Options

Asset Classes

Equity (E): Invest in stocks of companies, offering the potential for higher returns but also higher risk.
Corporate Bonds (C): Invest in bonds issued by corporations, providing a balance of risk and return.
Government Bonds (G): Invest in government securities, offering lower risk and stable returns.
Alternative Investment Funds (A): Invest in alternative investment funds, such as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

Investment Choices:

Active Choice: Allows you to actively choose the allocation percentage among different asset classes based on your risk tolerance and investment goals.
Auto Choice: A lifecycle fund that automatically adjusts your asset allocation based on your age, reducing risk as you approach retirement.

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National Pension System