Securing retirement with NPS: 5 reasons for salaried professionals to invest

The National Pension System, or NPS, could be a suitable choice for salaried professionals looking for investment options to build a retirement corpus. In addition to the tax benefits, NPS is considered as a safer investment avenue than others as it is managed by the Pension Fund Regulatory and Development Authority (PPFRDA), the apex regulatory body for pension schemes in India.

In addition to generating significant returns on investment, the main goal of the NPS is to ensure that account holders get a steady income in their retirement years. The scheme is open to all Indian citizens aged 18 to 70 years.

Here are 5 reasons the salaried employees should consider NPS as a retirement planning option:

1. Tax benefits: NPS provides tax exemptions of up to ₹1.5 lakh under Section 80CCD (1). Furthermore, under Section 80CCD(2) of the Income-Tax Act, 1961, the employer’s NPS contribution is eligible for deductions.
2. Long-term wealth generation: Investing in NPS ensures that salaried individuals save in a disciplined manner, facilitating long-term wealth accumulation. As more salaried individuals opt for NPS as their retirement savings instrument, the government-run pension scheme is gaining increasing recognition for its role in long-term wealth creation. According to NPS Trust, as of June 30, 2024, the total assets under management of NPS amounted to ₹12,47,825 crore, of which corporate subscribers accounted for ₹1,82,262 crore. The assets held by corporate employees have shown significant growth in recent years — from ₹90,634 crore in 2021-22 to ₹1,17,281 crore in 2022-23, and ₹1,66,729 crore in 2023-24.
3. Steady income after retirement: NPS provides a regular income after retirement. Upon reaching the age of 60 or superannuation, NPS subscribers are allowed to withdraw up to 60% of the lump sum amount and the remaining 40% would be used for an annuity plan or regular payment of pension.
4. Diversifying portfolio: For salaried professionals, NPS plays an important role in diversifying their portfolio. Investing in NPS can help salaried professionals lower their portfolio risk by increasing diversity and reducing their holdings in stocks and other equity assets.
5. Transparent and regulated: As it is managed by the PFRDA, NPS is subject to strict regulatory norms that are designed to guarantee accountability, transparency and investor safety.

In conclusion, NPS is a handy retirement plan due to its tax advantages and flexibility in investment options. It helps salaried individuals to save for their retirement years and provides market-linked returns on their investments.