The National Pension Scheme, or NPS, is a vital investment plan that provides financial security during your retirement.
With NPS, you can safeguard yourself against relying on others during your vulnerable years.
National Pension Scheme
Initially launched in 2004 for government employees, the National Pension Scheme (NPS) was later opened to all employees in 2009.
NPS is a popular retirement scheme that allows users to create a sizable fund for their retirement by investing small amounts on a monthly basis.
With its affordable, risk-free, and high-return investment options, NPS is considered one of the best investment tools offered by the government.
According to News18, the National Pension System offers individuals the flexibility to invest in corporate bonds, government securities, or equity.
Any Indian citizen aged between 18 and 70 can invest in NPS and make regular contributions during their working years.
Upon reaching the age of 60, individuals can withdraw a portion of the accumulated funds and receive regular pension income from the remaining amount.
Two Investment Options for NPS Investors
The National Pension System offers two investment options to its subscribers: Active and Auto.
With the Auto option, subscribers give fund managers the freedom to invest their money in various financial fields as they see fit.
On the other hand, the Active option provides subscribers with the freedom to direct fund managers on where to invest their money.
NPS Active Choice
According to News18, NPS members who wish to choose their own asset blend can opt for this choice.
With this option, subscribers can select the ratio in which their money will be spread across different asset classes, giving them more control over their assets.
However, even with this option, there are restrictions, as a maximum of 75% can be allocated to stocks. This limit was increased from 50% a few years ago.
NPS Auto Choice
Furthermore, as explained, the NPS offers three funds for auto allocation (NPS auto choice option).
The first is the Default Moderate Life Cycle Fund, with a maximum equity investment of up to 50 percent.
The second is the Conservative Life Cycle Fund, which allows for only up to 25% investment in equities.
The third is the Aggressive Life Cycle Fund, which permits up to 75% investment in equity.
