NEW PENSION SCHEME (NPS)
What is a NPS?
NPS is similar to Mutual funds. You keep aside some money for your retirement and this money is put into the capital market. Hence, the sum which you will get post retirement will be dependent on the performance of capital market. These are managed by fund managers.
Currently 6 fund houses appointed by the government are available under NPS. These are SBI Pension Funds Private Limited, UTI Retirement Solutions Limited, ICICI Prudential Pension Funds Management Company Limited, Religare Pension Fund Limited, IDFC Pension Funds Management Company Limited, and Kotak Mahindra Pension Fund Limited.
There are 3 schemes available under NPS which is:
Fund E: If you invest in this fund, then a portion of not more than 50% of your invested money will be put into equity. You should consider investing in this retirement plan only if your risk appetite is high as up to 50% of your money will be linked to the performance of equity.
Fund C: if you invest in this fund, then all of the money will be put into fixed income instruments like corporate bonds and government securities. You should consider investing in this fund if your risk appetite is medium as corporate bonds are not that risky.
Fund G: In this fund, all of your money will be invested in government securities. Hence, this is suited for you if you want it to be an almost risk free investment.
Personal Finance TIPS FOR EMPLOYEES
* If you are planning to save for your retirement then you should avail NPS as the fund management charges are very low which is 0.0009% compared to 1.5% – 2.5% for mutual fund or insurance products.
* Currently, NPS does not offer any tax exemptions unlike other retirement plans. It falls under the category EET (exempt-exempt-tax) system which means that maturity benefits you receive post retirement will be taxable. However, with DTC replacing the current tax code, NPS will be tax exempted upon withdrawal too. Therefore, you should avail this scheme when DTC comes into place.
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