It’s never too late to plan for retirement. Effective planning can ensure a comfortable financial future when you put your feet up. Here are six investor-friendly features of the National Pension System.
A brief introduction to the National Pension System
The National Pension System is a retirement planning investment scheme offered to individuals. In the National Pension Scheme, up to 60% of the maturity amount can be withdrawn on completion of the investment tenure.
The remaining 40% is mandatorily reinvested in an annuity scheme. This gives investors in the National Pension System a regular income, called a pension, for the duration of their lifetime.
Additional Reading: All You Need To Know About Investing In NPS
Flexible investment option
The National Pension System is an ideal investment option for investors who are looking to salt away funds for their post-retirement years.
If you are the type of investor who is wary of taking risks and who does not want to actively manage an investment portfolio consisting of debt and equity investment products, then the National Pension System is your answer.
Here’s a handy tip. Start saving for your retirement early. In fact, the earlier, the better.
If an investor invests in the National Pension System, he can invest in both equities and debt instruments through one single scheme: the National Pension Scheme. Through the National Pension Scheme, you can choose your investment allocation across debt and equities. You can even vary the investment allocation, to switch between equity investments and debt investments.
Advantages of the National Pension System
- The primary advantage of the National Pension System is that this scheme is a low cost investment option.
- The government has, under Section 80CCD (1b) of the Income Tax Act, introduced additional tax benefits for investments in the National Pension System.
- Additionally, 40% of the total investment corpus is exempted from taxes on maturity of the investment tenure.
Additional Reading: National Pension System v Public Provident Fund
Disadvantages of the National Pension System
There are a few disadvantages of investing in the National Pension System.
- A specific portion of the accumulated corpus has to be mandatorily reinvested in an annuity product, available from insurance companies.
- The annuity is also taxable in the year that the investor receives the annuity money.
Additional Reading: What Are The Best Ways To Invest After Retirement?
New investor friendly features of the National Pension System
Introduction of the mobile app
A free mobile app, ‘NPS by NSDL e-Gov’ was recently launched for the convenience of investors in the National Pension System.
With the introduction of the new mobile app, investors can view their account information, scheme-wise investment holdings and even track the Net Asset Value (NAV) of the schemes they are invested in.
An investor can also obtain transaction statements for specific financial years along with details of the five most recent contributions made. The investor can also make changes to investment allocations on the mobile app.
Address change through authentication of Aadhaar
Investors in the National Pension System can now update or revise their address information by using the Aadhaar-linked authentication facility. All an investor needs to do is enter his Aadhaar number to make the necessary modifications.
On entering the Aadhaar number, a One Time Password (OTP) is generated. This One Time Password is required for verification of the investor’s Aadhaar number. Following this, the address details are matched with those given in the Aadhaar records.
Additional Reading: Tips To Save For Retirement At Different Life Stages
Online IPIN generation
All eNPS subscribers can access the system immediately upon registration. Now there is no need to wait for a physical IPIN to be issued. This has been automated, and with the integration of online channels the generation of IPIN for investors is instantaneous.
Additional Reading: How You Can Resolve Financial Dilemmas At Different Life Stages
By using the IPIN credentials, investors can access their National Pension System investment accounts to make monetary contributions through the eNPS contribution page.
Activation of Tier II account through eNPS
A subscriber holding a Tier I National Pension System account will now be able to activate a Tier II account online through eNPS. The investor only needs to enter the Permanent Retirement Number (PRAN), date of birth and PAN details.
On receipt of a One Time Password (OTP) sent to the investor’s registered mobile number, the subscriber can proceed to create a Tier II National Pension System account.
Transfer funds from Tier II account to Tier I account
Up until now, there was no facility available to effect the transfer of funds from a Tier II account to a Tier I account. Now this new facility has been introduced where the PoP can process an investor’s request for transfer of funds between account categories.
There is no limit on the fund transfer amount or the number of transfers that can be requested by an investor.
Additional Reading: Retirement Planning For Everyone
With these new features introduced in the National Pension System, investing in this retirement fund scheme has become increasingly simpler and more personalised.
Are you prepared to begin planning for your retirement?