What critics miss about the NPS

Summary: The NPS debate continues to divide investors, but our readers remind us why nuance matters. In response to Dhirendra Kumar’s recent note, voices from across India weighed in—balancing frustrations about annuities and tech glitches with praise for its discipline and design.

When Dhirendra Kumar argued in his recent Editor’s Note that the National Pension System (NPS) deserves more nuance than the online outrage it often attracts, readers responded with passion and precision. Their emails, spanning corporate executives, professionals, retirees and ordinary investors, revealed why this simple product continues to stir such strong emotions.

A disciplined tool, not a perfect one

Many readers agreed with the core argument that NPS enforces financial discipline in a way few products do.

“NPS is good for retirement planning,” wrote Mehul Amalsheda, “but I’ve noticed that with each contribution, transaction charges keep getting deducted. The cumulative effect can be significant over time.”

Vijay Karunakaran echoed the sentiment that despite some drawbacks, the product remains useful: “NPS has some disadvantages, but its advantages outweigh them in the long run.”

Rajaram S B found the note “a great piece of writing” precisely because it reframed the purpose: “Retirement investing isn’t about maximising returns—it’s about creating a system you can stick with for 30 or 40 years.”

The annuity divide

If there was one recurring theme, it was frustration with the mandatory annuity clause.

“The only negative is the annuity, which no one can do anything about due to the powerful insurance lobby,” said B Satyandra. Praveen Nair called the current 6 per cent yield “not enough to beat inflation,” while Diwakar Sharma pointed out that “the annuity payout is taxed even on the principal amount—a serious issue that needs fixing.”

Muralidhara Reddy shared a striking example from personal experience. While helping his household staff set up a retirement plan, he abandoned NPS because of its rigidity: “She should be the final authority on how to manage her money. The rule that forces part of her corpus into annuity feels paternalistic. For a diligent saver, that’s a deal-breaker.”

Others saw the other side. Mohan Goswami wrote that lifelong annuity payments “avoid reinvestment risk when interest rates fluctuate.” CMA R B Laddha agreed, calling periodical annuity receipts “the best option considering longevity.”

Tech glitches, access gaps and design flaws

A few readers flagged the platform experience itself as a deterrent.

“I have sent umpteen emails about the drawbacks of the NPS app for 11 months,” wrote T V Shivananda, “but there’s neither improvement nor acknowledgement.”

Raj Tobin, who exited after a decade of investing, detailed issues ranging from login failures and confusing options to the difficulty of correcting errors near retirement. “Customer care keeps you in a loop,” he wrote, “and even when changes are approved, they don’t reflect in your account.”

Tax, discipline and the case for equity

Some readers emphasised what critics tend to ignore—the tax benefit and forced saving.

Anil Maheshwari reminded that “you get roughly a 30 per cent tax saving immediately, so your real investment is 70 per cent while returns accrue on 100 per cent.”

Jagdeep Singh Wadhwa calculated that for those in higher tax brackets, this boosts effective annual returns to as high as 15–16 per cent.

Meanwhile, Sandeep Ahlawat, a state government employee, lamented limited flexibility: “At 40, my equity exposure is restricted to 40 per cent. It should be raised to at least 75 per cent for government employees. We should be given more freedom.”

Policy changes, not social media outrage

Several readers echoed Kumar’s criticism of finfluencer-led negativity. Debraj Sengupta, a financial planner, called it a “confusing campaign spread by so-called influencers” who oversell glamour and underplay discipline. He urged a government-backed awareness drive—“a campaign titled NPS ho aapka burhapa ka saathi.”

Satyananda Kumar agreed that more education is essential: “NPS Trust must talk about itself the way mutual funds talk about SIPs. For private-sector employees, this is the only structured retirement saving left.”

Mixed experiences, enduring faith

Vijaykrishna B, a long-time Mutual Fund Insight reader, wrote movingly: “Everything you believe in and write about actually works. I’ve made my maid run a SIP for eight years—she now has a handsome corpus.” He said the NPS piece reflected the same clarity: focus on what’s actionable and ignore the noise.

Mugdha Ranade, an ophthalmologist, praised the product’s lesser-known advantages: “Asset allocation and rebalancing are wonderfully possible without tax implications. I’m unendingly grateful I started when it wasn’t easy to open a personal account.”

For Vishwas Kindre, the results speak for themselves: “I’ve seen annual returns of 11–12 per cent for six to seven years—safe, steady and risk-free.”

Others, like Amit Sinha and Lloyd Fernandes, felt the current rules need refinement: “At best, NPS now looks like a poor cousin of mutual funds with a lock-in,” wrote Sinha. Fernandes added, “The 15 per cent equity cap after 50 ensures you don’t have enough for retirement—investors must have more say.”

The bigger picture

Despite differences in tone, readers agreed on one point—NPS’s imperfections don’t erase its value. As Velmurugan Sumathi put it, “It’s commendable to appreciate a product that isn’t glamorous but is in every Indian’s interest.”

And Nilotpal Ganguly, writing from Bahrain, summed it up best: “Your note offered rationality in a world of finfluencer cacophony. I missed investing in NPS, but your piece gave me perspective.”

The takeaway

NPS may not be flawless, but it remains one of the few products that make Indians save for a future they might otherwise postpone. In a country without universal social security, that structure—however imperfect—still matters more than its trending hashtags.

Credits

Mehul Amalsheda • Vijay Karunakaran • Rajaram S B • B Satyandra • Praveen Nair • Diwakar Sharma • Muralidhara Reddy • Mohan Goswami • CMA R B Laddha • T V Shivananda • Raj Tobin • Anil Maheshwari • Jagdeep Singh Wadhwa • Sandeep Ahlawat • Debraj Sengupta • Satyananda Kumar • Vijaykrishna B • Mugdha Ranade • Vishwas Kindre • Amit Sinha • Lloyd Fernandes • Velmurugan Sumathi • Nilotpal Ganguly

This article was originally published on October 23, 2025.