I am totally in the dark about the New Pension System (NPS). Can you enlighten me?
The NPS is nothing else but a very cheap mutual fund on which you get a tax break. It is a new type of system altogether in which you would not get any fixed income. Things going for it include it being less expensive than a mutual fund and you also get tax breaks. Investments must be made consistently. At the end, whatever amount has been accumulated, assuming you keep investing till your retirement, can be brought out.
And when you bring out money after your retirement, then you can plough back 60 per cent of the money. The amount of pension you would get will depend on your investment’s performance.
If you are far away from your retirement, then you have the freedom to choose which plan you want to opt for, and which fund manager to manage your fund. Every fund offers four plans while the PFRDA regulates it. After you take the plan, then you would have to take a permanent retirement account number for which you would have to contact the point of sale of NPS.
The structure is such that you would not be able to know exactly how much pension you would get. However, hopes are high that you would get a better pension from NPS than from all the other guaranteed return pension alternatives because of this very structure.