Saturday, December 3, 2011

New Pension Scheme

New Pension Scheme is introduced by the Govt. of India to provide pension for all the salaried and self-employed citizens of India. This has several useful features and benefits backed by the Government of India.

How to open an NPS Account? What is the procedure?
There are many POPs (Point of Presence). Almost all the public banks and some of the private banks are involved in here. You can ask the procedure through the toll free number before going there. All the State Banks, Muthoot and private banks like Axis bank, ICICI bank are some of the famous POPs available.

Go to the nearest POP.
Get your address proof and Id proof along with you. (PAN card and Ration card works best)
If ration card is not available, get your telephone bill.
Minimum Investment: Rs.6000 in a year. In installments, at least Rs. 500/- in a month.

What are the advantages of NPS?
* Primarily to have the planning for your retirement pension, if you are salaried/self-employed.
* Good lock-in period. You will be able to touch it only at 60 years. (Is it an advantage? sometimes, it might work against you. After all, you are saving for your future and you need this!)
* Very less charges and good tax benefits.

How is my money allocated in NPS?
Okay. All is fine. I am going to get it only after 20-30 years. Where will my money get invested...
NPS provides two approaches to the amount invested in it. They are .,

  1. Active Choice 
  2. Auto Choice - Lifecycle Fund
If you are not choosing anything, automatically your investment will fall under the Auto Choice. Auto Choice will have reduce the equity exposure as the age increases and at the age of 60, there will be almost zero equity exposure.

The returns for the past two years are in the range from 4% - 26% according to the fund selected. Following funds are available for selection. It also depends on what choice you make (How much equity exposure and how is the market at that time)

Max. equity exposure allowed is only 50% at any point of time and it would also track only the index fund of BSE or NSE according to the fund selected.

Next post will have some more details of NPS.

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