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Wednesday, December 18, 2013

NPS one of the Best way to plan for retirement


Pension plans provide financial security and stability during old age when people don't have a regular source of income.
 Retirement plan ensures that people live with pride and without compromising on their standard of living during advancing years.

Pension scheme gives an opportunity to invest and accumulate savings and get lump sum amount as regular income through annuity plan on retirement. National Pension Scheme is launched by Govt. on 01.01.2014. The New System is structured into two tiers: Tier-I account: This NPS account does not allow premature withdrawal and is available to all citizens from 1 May 2009.

Tier-II account: This NPS account permits withdrawal for exceptional reasons only, prior to the retirement age. Additionally, to encourage people from the unorganised sector to voluntarily save for their retirement the Central Government launched a co-contributory pension scheme, 'Swavalamban Scheme .

 Under Swavalamban Scheme - External website that opens in a new window, the government will contribute a sum of Rs.1,000 to each eligible NPS subscriber who contributes a minimum of Rs.1,000 and maximum Rs.12,000 per annum. 

This scheme is presently applicable upto F.Y.2016-17. NPS offers following important features to help subscriber save for retirement: The subscriber will be allotted a unique Permanent Retirement Account Number (PRAN). This unique account number will remain the same for the rest of subscriber's life. This unique PRAN can be used from any location in India. 

Government of India launched this scheme as pension was growing at compound rate and India is growing at simple rate.

Exit from Tier-I can only take place when an individual leaves Government service. The National Pension System (NPS), launched by the Pension Fund Regulator and Development Authority (PFRDA). The theme offers complete flexibility. The capitalist decides the share of the corpus that goes into equity, company bonds and government securities. Under this selection, the investor's age decides the equity exposure. 


The 50% allocation to equity is reduced every year by 2% after the investor turns 35, till it comes down to 10%. This is in keeping with the strategy to opt for a higher-risk, higher-return portfolio mix earlier in life. Gradually, as the investor approaches retirement, he moves to a more stable fixed-return, lowrisk portfolio. This automatic rejigging of the asset allocation is a unique feature of the NPS. 


Under this section, if an employer contributes 10% of the salary (basic salary plus dearness allowance) to the NPS account of the employee, this amount gets tax exemption of up to Rs 1 lakh. This is over and above the Rs 1 lakh tax deduction under Section 80C.

NPS one of the Best way to plan for retirement


Pension plans provide financial security and stability during old age when people don't have a regular source of income.
 Retirement plan ensures that people live with pride and without compromising on their standard of living during advancing years.

Pension scheme gives an opportunity to invest and accumulate savings and get lump sum amount as regular income through annuity plan on retirement. National Pension Scheme is launched by Govt. on 01.01.2014. The New System is structured into two tiers: Tier-I account: This NPS account does not allow premature withdrawal and is available to all citizens from 1 May 2009.

Tier-II account: This NPS account permits withdrawal for exceptional reasons only, prior to the retirement age. Additionally, to encourage people from the unorganised sector to voluntarily save for their retirement the Central Government launched a co-contributory pension scheme, 'Swavalamban Scheme .

 Under Swavalamban Scheme - External website that opens in a new window, the government will contribute a sum of Rs.1,000 to each eligible NPS subscriber who contributes a minimum of Rs.1,000 and maximum Rs.12,000 per annum. 

This scheme is presently applicable upto F.Y.2016-17. NPS offers following important features to help subscriber save for retirement: The subscriber will be allotted a unique Permanent Retirement Account Number (PRAN). This unique account number will remain the same for the rest of subscriber's life. This unique PRAN can be used from any location in India. 

Government of India launched this scheme as pension was growing at compound rate and India is growing at simple rate.

Exit from Tier-I can only take place when an individual leaves Government service. The National Pension System (NPS), launched by the Pension Fund Regulator and Development Authority (PFRDA). The theme offers complete flexibility. The capitalist decides the share of the corpus that goes into equity, company bonds and government securities. Under this selection, the investor's age decides the equity exposure. 


The 50% allocation to equity is reduced every year by 2% after the investor turns 35, till it comes down to 10%. This is in keeping with the strategy to opt for a higher-risk, higher-return portfolio mix earlier in life. Gradually, as the investor approaches retirement, he moves to a more stable fixed-return, lowrisk portfolio. This automatic rejigging of the asset allocation is a unique feature of the NPS. 


Under this section, if an employer contributes 10% of the salary (basic salary plus dearness allowance) to the NPS account of the employee, this amount gets tax exemption of up to Rs 1 lakh. This is over and above the Rs 1 lakh tax deduction under Section 80C.