What is NPS?

What is NPS?

What is NPS & Why It’s Crucial for Your Retirement Planning?

Introduction to NPS (National Pension System)

The National Pension System (NPS) is a government-backed retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It allows individuals to invest systematically during their working years and receive a stable income post-retirement.

Key Features of NPS

  • 🏦 Dual Benefit: Invests in both equity and debt for growth and stability
  • πŸ”’ Lock-in Until 60: Encourages long-term disciplined saving
  • πŸ’Ό Portable: National account number (PRAN) stays the same even if you change jobs
  • πŸ’° Low Cost: Fund management charges are among the lowest
  • πŸ“ˆ Market-Linked Growth: Offers higher returns than traditional fixed instruments

Why is NPS Important for Retirement Planning?

1. Growing Need for Retirement Corpus in India

India lacks a formal pension system for most private-sector employees. NPS bridges this gap by providing a reliable retirement corpus and monthly pension after retirement.

2. Disciplined and Long-Term Savings

NPS builds a habit of regular, goal-based savings, locking funds until retirement and promoting long-term financial security.

3. Tax Benefits

  • Deduction up to β‚Ή1.5 lakh under Section 80C
  • Additional β‚Ή50,000 under Section 80CCD(1B)

4. Flexible Asset Allocation

Choose Auto or Active allocation between equity, corporate debt, and govt. securities as per your risk appetite.

5. Annuity for Monthly Pension

At retirement, 60% of the corpus is tax-free and 40% goes into an annuity plan to provide a stable pension income.

Why NPS is Necessary in India

  • Only 10–15% of Indians are covered by formal pension systems
  • EPF/PPF often fall short in retirement planning
  • Inflation, health costs, and longer life expectancy increase retirement funding needs

How to Invest in NPS Online (No Paperwork)

You can now open or contribute to your NPS account 100% online.

Performance Chart - ICICI PFM (As of July 2025)

Past Returns (%)

Scheme 1 Year 3 Year 5 Year Since Inception
ICICI Equity (Tier I) 21.4% 17.8% 14.6% 13.9%
ICICI Corporate Debt 7.8% 8.6% 8.3% 9.1%
ICICI Government Securities 6.5% 7.4% 7.0% 8.2%

*Returns are indicative. Actual performance may vary. Source: NPS Trust.

Example: Power of Compounding with NPS

Monthly Investment Tenure Estimated Return Corpus at 60
β‚Ή5,000 25 Years 9% p.a. β‚Ή52+ Lakhs

FAQs

  • Is NPS only for salaried people? No, self-employed and business owners can also invest.
  • Can I invest if I already have EPF? Yes, NPS complements your retirement corpus.
  • Is my money safe in NPS? Yes, it’s regulated by PFRDA and managed by top fund managers.
  • Is partial withdrawal allowed? Yes, under specific conditions like illness or education.

Conclusion

NPS is a must-have tool in every Indian's retirement portfolio. It offers long-term savings, market-linked returns, tax benefits, and financial security post-retirement. Start today and gift yourself a stress-free retirement.