The National Pension System (NPS) is a government pension scheme, which was launched for government employees on January 1, 2004. Later in 2009, it was opened for private sections too.
Best ways of investing in NPS
NPS is a type of investment scheme which guarantees market-based returns. The government does not annually announce returns. There are many options for investment in NPS such as equity fund (E), government bonds (G), corporate bonds (C). Apart from this you also have to choose the fund manager.
You have two ways of investing:
- You can choose your own investments. It means how much money to put in (E), (G) or (C). This is called Active Choice. There are just a few limitations. Corporate Sector NPS and All Citizens Model NPS customers have a maximum of 50% to invest in Equity Fund (E). This limit is 15% in the government NPS.
- Corporate Sector NPS and All Citizens Model NPS customers also have the option of Auto Choice. In the beginning, equity is more invested. Gradually, the investment in equity (E) decreases with age. It is called Auto Choice or LifeCycle Fund. Note that this option is not available to government employees.
Sectors in the NPS
The NPS account is fully portable. You can change your NPS to another sector after you quit or change the job. There are several ways to open an NPS account. In what way you open an account, it is decided by how you come under the NPS.
There are four sectors in the NPS:
- Central Government for Central Government employees
- State Government for State Government employees
- Corporate Sector for Private Sector Staff
- All Citizens Model, for yourself
According to the new rules, the account holders who have contributed for three consecutive years can get up to 25% of the total amount. The new rule is effective from August 10, 2017. Earlier, NPS account holders were allowed to withdraw money only after the completion of 10 years in the scheme.