Whether investing in equity or in government bonds, NPS has schemes to invest in all asset classes. Different schemes have been fixed for them.
From tax savings to retirement planning, the National Pension System (NPS) is quite popular. While all other tax saving options fall within the limit of Rs 1.5 lakh of section 80C, the NPS also offers the option of saving tax by going beyond this limit. Also, on retirement in NPS, you will not be able to withdraw the entire amount once, which will protect your future. On maturity, you will have to take an annuity plan for some part of the investment, so that the pension will continue to be received. NPS has another feature that makes it different from other options – the convenience of choosing pension funds and schemes according to your risk.
How many schemes in NPS?
Whether investing in equity or in government bonds, NPS has schemes to invest in all asset classes. All pension fund managers have options like Scheme A, Scheme E, Scheme C, Scheme G. Scheme E is invested in equity where there is more risk as well as more risk. Scheme G invests in government bonds while Scheme C invests in corporate debt plans.
Who gave better returns?
In Tier I Scheme E, LIC Pension Fund has given 74.34 per cent returns in one year whereas UTI Retirement Solutions, Kotak Pension Fund has earned more than 72 per cent. That is, all three have given better returns than the benchmark Sensex-Nifty.
Scheme G is that option of NPS through which investment in government bonds. Government bonds are considered safe investments. Looking at their long-term return on investment, LIC Pension Fund has shown growth in double digit while HDFC Pension Fund has given 9.88% returns.
Through Scheme C of NPS, you can invest in corporate debt plans. These four pension funds have given double digit returns over a period of one year –
Understand NPS Investment
Tier 1 account of NPS is compulsory whereas Tier 2 account is voluntary i.e. you can open Tier 2 account only if there is Tier 1 account. The difference between the two is that there are restrictions on withdrawing money from Tier 1 account whereas funds can be withdrawn from Tier 2 account. One has to invest at least 6,000 rupees in a financial year in NPS.
In the NPS Auto Choice, your allocation is automatically changed. As you age, investment in equity will automatically decrease and the investment share will increase towards safer investment components like debt. But if you want to allocate yourself, then you can take active choice. In this, you have the facility to choose your scheme and pension fund. Currently, there are 9 pension fund managers who manage your NPS investment. These are –
- ICICI Prudential (ICICI Pru) Pension Fund
- LIC Pension Fund
- Kotak Mahindra Pension Fund
- Reliance Capital Pension Fund
- SBI Pension Fund
- UTI Retirement Solutions
- HDFC Pension Management Company
- DSP Blackrock Pension Fund Managers
- Aditya Birla Sunlife Pension Fund Managers
