Reasons To Invest In National Pension Scheme (NPS)

National Pension Scheme is a government introduced social security investment option specially designed for employees in private, public or unorganized sectors. This scheme allows a person to invest in a pension account at regular intervals during the time they are employed. After retirement, the account holder can withdraw a certain amount from the investment and the rest shall be provided as regular pension to the account holder. One can start investing with a minimum amount of Rs 500. 

Reasons To Invest In National Pension Scheme (NPS)

Below mentioned are some reasons why you should consider investing in National Pension Scheme:

• Source of Income

As you retire your source of income stops but the regular expenses remain the same as it was earlier. To maintain the same and a healthy lifestyle after retirement, just like you did when you had a regular source of income, you will require a source of income in your retirement phase as well. With the National Pension Scheme, you can ensure a regular source of income for yourself in the retirement phase of your life.  

• Low-Risk Investment

National Pension Scheme is a low-risk investment option as compared to other investment options. The equity exposure under this scheme provides a high return on investment with low risk involved. Currently, the cap range is 75% to 50% on the equity exposure of the National Pension Scheme. The equity portion shall reduce by 2.5% on a yearly basis beginning from the year in which the investor completes 60 years of age. 

• Fund Allocation

National Pension Scheme offered flexibility to choose the fund portfolio according to the convenience of the investor. The investor can choose the fund portfolio according to their risk appetite. The investor can rearrange the funds anytime in case the investor is unsatisfied and thinks the fund performance is working as expected. The investor can select the fund portfolio according to their risk tolerance and their budget. 

• Guaranteed Returns

Even though a portion of the investment of the National Pension Scheme is invested in equities which may not provide an assured return, the overall returns are guaranteed under the National Pension scheme. The returns provided by the National Pension Scheme are rather higher than other investments such as Fixed Deposits or PPF. Returns from National Pension Schemes are much higher as compared to traditional tax saving investment options. 

Conclusion

Under the National Pension Scheme, you can withdraw a percentage of your pension corpus as a lump sum and the remaining pension corpus shall be provided to you as a monthly income for a certain period of time. The pension amount you receive usually depends on the performance of the fund's portfolio under your NPS. 

One of the main reasons that people choose to invest in the National Pension Scheme is that this scheme involves low risk, this scheme involves less risk as compared to other tax-saving investment options. You should consider investing in the National Pension Scheme if you are looking for regular income in your post-retirement phase of life.

Also Read: 

Does My Wife Get My Pension if I Die?

Do You Lose Your Pension if You Get Laid off?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.