I wanted to know about the New Pension System. Will it be a good investment vehicle for someone working in the private sector?
The New Pension System (NPS) is open to every Indian citizen between the age of 18 and 55. The NPS is a low-cost and transparent investment vehicle, which avails you a tax break as well. The only concern is that you cannot redeem your money invested in the NPS before the investment term ends. However, since a good part of your savings should be invested for retirement, the lock-in in the NPS can turn out to be a good thing. The fact that the money is not accessible can be a benefit in the long run. The NPS allows you to choose from 2-3 plans, but the default plan is good enough as well because it decreases your exposure to equity as you grow older. Upon retirement, you can withdraw 60 per cent of the accumulated money, while the other 40 per cent is converted into annuity that will provide you with a regular pension.