An overview of the National Pension System

The National Pension System (NPS) is a Government of India initiative to extend pension benefits to all Indian citizens. It is mandatory for central government employees and the employees of some state governments to invest in the NPS. As per a government directive, private-sector employees are now given a choice between the Employees' Provident Fund Organisation (EPFO) and the NPS. The employee contribution is generally 10 per cent of the basic salary and DA, with a matching contribution made by the employer. However, in the case of government employees, the employer's contribution has been raised to 14 per cent. Capital protection and inflation protection Your capital is not protected as the NPS invests a certain amount in equities. The returns are therefore market-linked. However, equities are expected to beat inflation over the long term, thus building a certain level of inflation protection into the NPS. Liquidity After three years of being in the scheme, you can withdraw up to 25 per cent of the contributions for defined expenses. These defined expenses are children's higher education or we

This article was originally published on October 21, 2021.