Is National Pension Scheme (NPS) a Good Investment?

The National Pension System (NPS) is a popular investment choice for individuals looking to secure their retirement with a structured savings plan. With tax benefits, long-term growth potential, and flexible contribution options, it appeals to those seeking a disciplined approach to retirement planning. However, like any investment, NPS comes with its own set of pros and cons, making it important to assess whether it aligns with your financial goals and risk tolerance.

Read more
  • Peaceful Post-Retirement Life

  • Tax Free Regular Income

  • Wealth Generation to beat Inflation

We are rated~
rating
7.7 Crore
Registered Consumer
50
Insurance Partners
4.2 Crore
Policies Sold

Invest ₹6,000/month & Get Tax Free Monthly Pension of ₹60,000

Make the most of your Golden years

+91
Secure
We don’t spam
Please wait. We Are Processing..
Your personal information is secure with us
By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company
Get Updates on WhatsApp
We are rated~
rating
7.7 Crore
Registered Consumer
50
Insurance Partners
4.2 Crore
Policies Sold
Disclaimer: ##Rs 60,000 are the monthly pension amounts at the assumed rate of return of 8% p.a. and 4% p.a. for unit linked insurance plans. This is an illustrative example and the returns are not guaranteed & dependent on the policy term and premium term availed along with the other variable factors. The market linked return of 60K per month is for an 18 year old investing 6k per month for 20 years in a whole life policy having policy term 82 years in which Systematic partial withdrawals start at the age of 65 years at 5% rate of withdrawal per year. The investment risk in the policy is borne by the policyholder. All Plans listed here are of insurance companies’ funds. *Tax benefits and savings are subject to changes in tax laws. All Plans listed here are of insurance companies’ funds. Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.
Pension Funds
Pension Funds Most Popular
Fund Name
AUM
Returns (in %)
3 Year
5 Year
10 Year
8,482 Cr
Returns
23.95%
Returns
31.9%
Highest Return
Returns
20.47%
Get Details
13,435 Cr
Returns
21.08%
Returns
27.7%
Highest Return
Returns
20.43%
Get Details
6,452 Cr
Returns
17.79%
Returns
22.67%
Highest Return
Returns
16.96%
Get Details
40,966 Cr
Returns
15.75%
Returns
23.42%
Highest Return
Returns
16.86%
Get Details

Disclaimer:
Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

What is the National Pension Scheme (NPS)?

The National Pension Scheme (NPS) is a voluntary retirement savings scheme in India. It is designed to provide financial security for individuals after retirement. Under the NPS, individuals can contribute a portion of their income to a pension fund, which is then invested in various asset classes like equities, bonds, and government securities. The accumulated corpus can be used to purchase an annuity plan or withdrawn as a lump sum upon retirement. The NPS is a flexible scheme that allows individuals to choose their investment options and contribution levels. It is also eligible for various tax benefits, making it an attractive retirement savings option for many people in India.

How does National Pension Scheme (NPS) Work?

The National Pension Scheme (NPS) works on a defined contribution basis, meaning the amount you receive upon retirement depends on your contributions and the performance of your investments. Here’s how it works:  

  • Contributions: You contribute regularly to your NPS account. This can be through your employer, or you can contribute individually.  

  • Investment: Your contributions are invested in various asset classes like equities, government bonds, and corporate bonds. The investment is managed by professional fund managers.

  • Growth: Over time, your investments grow based on the performance of the market.  

  • Retirement: When you retire, you can withdraw a portion of your accumulated funds as a lump sum. The maximum amount you can withdraw as a lump sum is 60% of your accumulated corpus. The remaining 40% must be used to purchase an annuity, which provides you with a regular income post-retirement.

Secure Your Retirement Today
Start Investing ₹6,000/month
Get Pension ₹60,000/month+
Including Life Cover
View Plan
Pension Plans
+Standard T&A Applied

People also calculate: NPS Pension Calculator

Is Investing in National Pension Scheme (NPS) a Good Idea?

Below are the reasons why NPS can be a good investment option: 

  1. Tax Benefits:

    • Deductions: You can claim tax deductions on your contributions to the NPS under Section 80C of the Income Tax Act. This means you can reduce your taxable income by up to ₹1.5 lakh per year.  

    • Partial Withdrawal: Partial withdrawals for specific purposes like buying a house or higher education are also tax-exempt, providing you with some financial flexibility during your working years.

    • Up to ₹2.5 lakh: You can claim a tax deduction of up to ₹2.5 lakh for your self-contributions to the NPS under Section 80CCD(1B). This means you can reduce your taxable income by this amount.

    Tax laws and regulations can change frequently, and it is crucial to seek expert guidance to ensure compliance with the latest rules.

  2. Flexibility:

    • Investment Options: NPS offers a variety of investment options, allowing you to choose based on your risk tolerance and financial goals. You can invest in equity funds, government bonds, corporate bonds, or a combination of these.  

    • Contribution Flexibility: You can contribute regularly, occasionally, or make lump-sum contributions. This gives you the freedom to adjust your contributions based on your income and financial situation.

  3. Government-Backed:

    • Security: Being government-backed, NPS provides a sense of security and stability. You can be confident that your retirement savings are safe and protected.  

    • Regulation: The scheme is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), ensuring transparency and accountability. This means you can trust that your funds are being managed professionally and ethically.  

  4. Portability:

    • Job Changes: NPS accounts are portable, allowing you to continue contributing even if you change jobs. This means you don't have to worry about losing your retirement savings if you switch careers or companies.  

    • Easy Transfers: Transferring your NPS account is a simple process. You can easily move your account from one fund manager to another or from one employer to another.

  5. Retirement Income:

    • Annuity: Upon retirement, you can use a portion of your accumulated funds to purchase an annuity, providing you with a regular income stream. This ensures that you have a steady source of income to meet your living expenses in retirement.

    • Lump Sum: You can also withdraw a portion of your funds as a lump sum. This gives you the flexibility to use your retirement savings as you see fit.

  6. Low-Cost:

    • Minimal Charges: NPS typically has lower charges compared to other retirement plans, helping you maximize your savings. This means more of your money goes towards your retirement goals, rather than being eaten up by fees.

  7. Diversification:

    • Multiple Asset Classes: NPS allows you to invest in a mix of asset classes, including equities, government bonds, and corporate bonds.
      This helps to reduce risk and protect your savings from market fluctuations.

Conclusion

The National Pension Scheme (NPS) is a great investment option for individuals aiming to secure their financial future. With its tax benefits, flexibility, government backing, and growth potential, NPS can be a valuable tool in building a substantial retirement corpus.

FAQs

  • Is it worth putting money in NPS?

    Yes, NPS offers tax benefits, long-term savings, and market-linked returns, making it a good retirement option.
  • What are the disadvantages of NPS scheme?

    Limited liquidity, mandatory annuity purchase, and partial exposure to market risks.
  • Is NPS better than PPF?

    NPS offers higher returns due to market exposure, but PPF is safer with guaranteed returns and tax benefits.
  • Is NPS a risky investment?

    Yes, NPS has market-linked risks, but these are mitigated by fund diversification across equity, government, and corporate bonds.

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

Secure Your Retirement Today
Start Investing ₹6,000/month
Get Pension ₹60,000/month+
Including Life Cover
View Plan
Pension Plans
+Standard T&C Applied
Secure your Retirement today!
START INVESTING
₹6,000/month
GET PENSION
₹60,000/month+
Heart
INCLUDING LIFE COVER
+ Standard T & C Apply*
Pension Calculator
Pension Calculator
How much do you need to save for retirement?
₹ 20,000
₹ 25,000
₹ 30,000
Monthly Expenses in 2024
Edit Done
Your expense go up every year by
Today 2024 Your expenses today in 2023, at the age of 34 Yrs
Your expenses in 2043, at the age of 55 Yrs
For a monthly pension of ₹77,300
you need to invest
₹14,300/month
Calculated as per past performance of 15%
View Plan Recalculate?
top
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL