How Good is the NPS (National Pension Scheme)?
In my opinion, the NPS is an excellent retirement savings instrument for multiple reasons. Firstly, the significant tax benefits under Section 80C and 80CCD make it very appealing from a financial perspective. Being able to claim deductions of up to ₹ 2 lakhs annually helps reduce taxable income and maximises long-term wealth creation.
Secondly, I really like the flexibility that NPS offers. You can choose your Pension Fund Manager (PFM) and decide how to invest your money, whether in equities or bonds, depending on your comfort level with risk. For example, if you’re okay with some risk, you can invest a portion in equities, which typically give higher returns over time (say, 10% or more), while allocating some to bonds for safer, steady returns (around 6-7%).
Additionally, the low fund management charges ensure a larger share of returns passes to the subscriber’s corpus instead of being eroded by high fees. Combined with the power of compounding over the long term, this can significantly magnify retirement savings.
However, limitations like the 40% annuity mandate and equity cap of 50% dilute the product’s appeal to some extent. The taxation of annuity income and mandatory purchases also reduces flexibility in NPS withdrawal rules. Regardless, the pros outweigh the cons for me.
Overall, I believe NPS is one of the best retirement planning tools available today. It provides structured growth. For long-term wealth creation and securing one’s retirement years, the NPS offers a transparent, flexible, and well-regulated path. The additional perks of portability and accessibility make it a great product for retirement readiness.
