Negative on the NPS?

A curious pattern has emerged in the influencer-driven corners of social media. Advisors and finfluencers, some of whom are quite prominent, have begun campaigning aggressively against the National Pension System. Their posts attract thousands of shares, their videos rack up impressive view counts, and their comment sections fill with worried investors wondering if they've made a terrible mistake.

The arguments against NPS follow a familiar pattern. They point to restrictions on withdrawals, complain about annuity requirements, calculate opportunity costs with impressive precision and conclude that savers would be better off avoiding it entirely. Some go further, urging existing subscribers to withdraw their money if their corpus is small enough and they fit the other conditions to qualify for early exit.

Suggested read: NPS gets an upgrade

Here's what strikes me about this campaign: it's technically correct on many points, whilst being fundamentally wrong about investing. The critics are so focused on optimising every decimal point of returns that they are unable to see the whole picture.

Let me explain with a simple observation about human behaviour. When someone tells you that something is reasonably good and worth doing, you nod and move on. There's no drama, no revelation, no reason to share that content with friends. But when someone warns you about a terrible mistake you might be making, complete with calculations and dire predictions, that's content worth spreading. Negativity generates engagement and engagement generates money, at least if you play the YouTube / Insta / X game well enough.

Suggested read: How to be a stock market expert (or sound like you are)

This isn't to suggest that all criticism of NPS is dishonest. The product has genuine limitations that deserve discussion. The annuity requirement reduces flexibility, the exit restrictions can be inconvenient, and yes, equity mutual funds might deliver higher returns over long periods. These are fair points worthy of consideration. Moreover, a serious rethink of the annuity rule is in the works, and that’s something I can personally vouch for.

However, here's what critics systematically overlook: retirement investing isn't primarily about maximising returns. It's about creating a system that you'll actually stick with for 30 or 40 years without constantly second-guessing yourself. Consider the typical journey of someone trying to optimise their way to retirement. They start with equity mutual funds, then read somewhere that direct plans are better than regular plans. They switch. Then they discover that small-cap funds have historically delivered better returns. They switch again. A few months later, someone points out that actively managed funds underperform their respective indices. Another switch. Then comes the realisation that US markets have outperformed Indian markets. More changes. Throughout this journey, they're paying exit loads, creating tax events and most importantly, never giving any strategy enough time to actually work.

Suggested read: Year's hottest fund vs KISS fund: Which strategy delivers higher returns?

NPS removes this temptation for endless tinkering. Money goes in through payroll deduction if you're a salaried employee, gets invested automatically across asset classes and stays locked away until retirement. It's boring, unglamorous and impossible to constantly fiddle with. These aren't bugs – they're features.

What critics often overlook is that for most people, their biggest retirement risk isn't earning a percentage less than theoretically optimal returns, which are, in any case, visible only in hindsight. It's not saving enough in the first place, or raiding their retirement corpus for a car or a house renovation, or panicking and selling during market downturns.

NPS addresses these real-world risks through its structure. The lock-in prevents premature withdrawals. The automatic investment prevents skipping contributions during busy months. The diversification across equity, corporate bonds and government securities prevents the all-or-nothing bets that many investors make when left to their own devices.

Is NPS perfect? Of course not. Should it be your only retirement investment? Probably not. But dismissing it entirely because it doesn't maximise every possible percentage point of return is the sort of advice that sounds sophisticated but often leads to worse outcomes. The next time you encounter aggressive criticism of not just NPS but any simple and straightforward savings product, ask yourself: Is this advice designed to help me build wealth, or is it designed to generate engagement? The distinction may matter more than the calculations.

Also read: Keep the faith