Retiring Rich: NPS guarantees a systematic income

 NATIONAL PENSION Scheme (NPS), launched in 2004, has evolved into a cornerstone of retirement planning, offer­ing market-linked returns and tax advantages to millions. Designed initially for government employees, it opened to all citizens aged 18-70 in 2009, regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

NPS operates on a defined contribution model, where subscribers build a corpus through regular investments into Tier I (mandatory, retirement-focused) and optional Tier II accounts. A unique Permanent Retirement Account Number (PRAN) ensures lifelong portability across jobs and locations. Investors choose from four asset classes— equity (E), government bonds (G), corporate debt (C), and alternatives (A)—with flexibility to switch funds or managers twice a year.

Low costs, among the world’s lowest at under 0.01 per cent an­nually, enhance long-term growth. Contributions start at ₹500 for Tier I and ₹1,000 yearly minimum, making it accessible.

Market-linked returns often outperform fixed-income options like PPF, averaging 9-12 per cent historically based on the asset mix. Tax perks shine under the old regime: ₹1.5 lakh under Section 80C, extra ₹50,000 via 80CCD(1B), employer match up to 10 per cent salary under 80CCD(2), and 60 per cent lumpsum tax-free at exit post-60.

Partial withdrawals (up to 25 per cent thrice after three years) cover emergencies like education or health. Post-retirement, 60 per cent can be withdrawn tax-free; 40 per cent buys an annuity for lifelong income, deferrable till 75.

Transparency reigns with 24/7 online tracking and mandatory disclosures. NRIs and self-employed benefit from its universality, reducing government pension burdens while empowering individuals.

For a ₹5,000 monthly contribution over 30 years at 10 per cent returns, the corpus could exceed ₹1 crore, yielding ₹40,000-plus monthly annuity (6 per cent rate). NPS suits long-term planners prioritising growth over guarantees, blending flexibility, efficiency, and security for a worry-free retirement.