NPS (National Pension Scheme) in 2024 – Ultimate Guide in Hindi

Summary

The video script by Mukul Malik for the Asset Yogi Show offers a comprehensive breakdown of India's National Pension System (NPS). It discusses the scheme's tax benefits, investment options, and the process of retirement planning. The script compares NPS with mutual funds and explains the advantages and disadvantages, including the minimum lock-in period and the annuity phase. It also covers the eligibility, contribution limits, and tax implications under both the old and new tax regimes, providing a clear guide for potential investors.

Takeaways

• 📈 The National Pension System (NPS) is a retirement scheme launched by the Government of India, regulated by the PFRDA, and aimed at retirement planning and tax saving.
• 💼 Initially for government employees, NPS was opened to all citizens in 2009, offering two types of accounts: Tier 1 for retirement planning and Tier 2 for investment planning.
• 🔢 NPS assigns a 12-digit PRAN to each subscriber, with Tier 1 requiring a minimum Rs.500 investment and Tier 2 a minimum Rs.1000 for account opening, and no maximum limit on contributions.
• 🚫 A minimum lock-in period of 3 years applies to Tier 1 accounts, allowing partial withdrawal after this period, with a full withdrawal only after 60 years.
• 💰 Tax benefits are a significant incentive for NPS investments, with contributions up to Rs.2 lakh deductible in Tier 1, but no tax benefits for Tier 2.
• 👤 Eligibility for NPS includes all Indian citizens between 18 and 70 years for Tier 1, and those with a Tier 1 account for Tier 2.
• 📊 Investment options in NPS include choosing a pension fund manager and selecting between active or auto asset allocation, with varying risk levels from government bonds to AIFs.
• 💹 At retirement, 60% of the NPS corpus can be withdrawn as a lump sum, with the remaining 40% invested in annuity for a monthly pension, but with potentially lower returns compared to market investments.
• 🔑 Subscribers can partially withdraw up to 25% of their total contributions after 3 years for specific emergencies, with no tax on such withdrawals.
• 💡 Taxation under the old regime offers deductions under sections 80C, 80CCD-1, and 80CCD-2, with the new regime providing only employer contributions under 80CCD-2, and annuity income taxed as regular income.
• 💼 Charges for NPS include account opening, points of presence (POP) charges, and fund management fees, which are generally lower than those of mutual funds but come with lower liquidity.

Q & A

What percentage of urban Indians over 50 regret not starting retirement planning early according to the MaxLife study?

According to the MaxLife study, 90% of urban Indians over the age of 50 regret not starting retirement planning early.

What is the National Pension System (NPS)?

The National Pension System (NPS) is a pension scheme launched by the Government of India, regulated by the PFRDA, aimed at retirement planning and tax saving.

Who can open a Tier 1 account in NPS?

Any Indian citizen between the ages of 18 and 70 can open a Tier 1 account in NPS.

What is the minimum lock-in period for a Tier 1 account in NPS?

The minimum lock-in period for a Tier 1 account in NPS is 3 years, after which partial withdrawals are allowed.

What is the minimum amount required to open a Tier 1 account in NPS?

The minimum amount required to open a Tier 1 account in NPS is Rs.500.

What are the two types of accounts offered by NPS?

NPS offers two types of accounts: Tier 1, primarily for retirement planning, and Tier 2, mainly for investment planning.

What is the tax deduction limit for employee contributions in NPS under Section 80C in the old regime?

In the old regime, the tax deduction limit for employee contributions in NPS under Section 80C is up to Rs.2 lakh in a Tier 1 account.

How does the asset allocation change with age in the active choice option of NPS?

In the active choice option of NPS, subscribers can choose their asset allocation, with a maximum of 75% in equity at the age of 50, decreasing by 2.5% every year until reaching 50% at the age of 60.

What are the three types of auto choice funds available in NPS?

The three types of auto choice funds in NPS are the aggressive lifecycle fund, the moderate lifecycle fund, and the conservative lifecycle fund, each with different risk levels and equity allocation based on the subscriber's age.

How much of the total corpus can be withdrawn as a lump sum upon retirement in NPS?

Upon retirement, 60% of the total corpus can be withdrawn as a lump sum in NPS, with the remaining 40% invested in the form of an annuity.

What is the maximum amount one can withdraw in case of an emergency from NPS after 3 years of contribution?

After 3 years of contribution, one can withdraw up to 25% of their total contribution in case of an emergency, regardless of the total corpus value.

What are the major charges associated with NPS?

The major charges associated with NPS include account opening charges, points of presence (POP) charges, and fund management charges, which range from 0.03% to 0.09% annually.

Outlines

00:00

📈 Introduction to NPS and Retirement Planning

The script opens with a discussion on the importance of retirement planning, highlighting a study by MaxLife that shows 90% of urban Indians over 50 regret not starting early. It introduces the National Pension System (NPS) as a popular retirement scheme in India, regulated by the PFRDA. The video aims to decode NPS, explaining its two types of accounts (Tier 1 for retirement planning and Tier 2 for investment), eligibility criteria, and minimum investment amounts. The script also mentions the upcoming Asset Yogi Show app and its potential for simplifying investments.

05:00

💼 NPS Investment Options and Auto Choice Lifecycle Funds

This paragraph delves into the investment options available within the NPS, including the selection of a pension fund manager and the choice between active and auto choice investment strategies. It explains the different lifecycle funds offered under auto choice, which adjust the equity allocation based on the subscriber's age, and the process of receiving a lump sum and annuity upon retirement. The script also points out the relatively lower returns on the annuity portion compared to market investments, and introduces a pension calculator for estimating future payouts.

10:03

🏦 NPS Withdrawal Rules and Taxation

The script explains the rules for partial withdrawal from NPS after a minimum of three years, allowing for a withdrawal of up to 25% of the total contribution in specific emergency cases. It outlines the tax benefits of NPS under the old regime, which falls under the EEE (exempt, exempt, exempt) category, and details the deductions available under sections 80C, 80CCD-1, and 80CCD-2. The new tax regime is also discussed, highlighting the changes in tax deductions and the taxation of the annuity portion of the NPS.

15:03

💡 Systematic Withdrawal and NPS Charges

The final paragraph discusses the option of systematic lump sum withdrawal, which allows subscribers to receive their lump sum amount in installments rather than a one-time payout. It also addresses the various charges associated with NPS, including account opening charges, points of presence charges, and fund management charges. The script compares these charges with those of mutual funds and acknowledges the drawbacks of NPS, such as low liquidity and the mandatory annuity investment, while also recognizing its suitability for those seeking a monthly pension.

Keywords

💡Retirement Planning

Retirement planning is the process of anticipating and preparing for all aspects of life after retirement, including financial planning, health, and lifestyle choices. In the video's theme, it is the main focus, as the speaker discusses the importance of starting retirement planning early and the role of NPS in achieving a secure retirement.

💡National Pension System (NPS)

The National Pension System is a government-backed pension scheme in India, designed to provide retirement savings for Indian citizens. It is a key topic in the video, where the speaker explains its benefits, investment options, and tax implications for retirement planning.

💡Pension Fund Manager (PFM)

A Pension Fund Manager is an entity responsible for managing the investments of a pension fund. In the context of the NPS, there are eight listed PFMs that subscribers can choose from to manage their pension funds, which is a critical decision as it affects the investment strategy and potential returns.

💡Tier 1 and Tier 2 Accounts

In the NPS, there are two types of accounts: Tier 1 and Tier 2. Tier 1 is primarily for retirement planning with a minimum lock-in period, while Tier 2 is for investment planning without an annual investment requirement. The video explains the differences and uses of these accounts in the context of retirement planning.

💡Lock-in Period

A lock-in period refers to the minimum duration for which funds must remain invested and cannot be withdrawn. In the NPS, Tier 1 accounts have a minimum lock-in period of three years after which partial withdrawals are allowed, emphasizing the long-term nature of retirement planning.

💡Tax Benefits

Tax benefits are incentives provided by the government to encourage certain behaviors, such as saving for retirement. The video highlights the tax deductions available for contributions to the NPS, explaining how these benefits can reduce an individual's tax liability.

💡Annuity

An annuity is a financial product that provides a stream of income in return for an upfront investment. In the NPS, a portion of the corpus is invested in an annuity to provide a regular income post-retirement. The video discusses the different types of annuity options available and their implications for retirement income.

💡Systematic Lump Sum Withdrawal

This is a feature that allows NPS subscribers to withdraw their lump sum amount not as a one-time payment but in installments over time, similar to a systematic withdrawal plan in mutual funds. The video mentions this as a new option for subscribers to receive their retirement funds.

💡Active Choice and Auto Choice

These are investment options within the NPS. Active choice allows subscribers to make decisions about their asset allocation, while auto choice automatically invests funds based on the subscriber's age. The video explains how these choices impact investment strategy and potential returns.

💡Lifecycle Funds

Lifecycle funds are investment options in the NPS that automatically adjust the asset allocation based on the subscriber's age, reducing risk as the subscriber approaches retirement. The video discusses the different types of lifecycle funds and how they are designed to align with the subscriber's risk tolerance over time.

💡Partial Withdrawal

Partial withdrawal is the facility to withdraw a portion of the funds before the maturity of the investment, usually in case of emergencies. The video explains the conditions and limits of partial withdrawal in the NPS, emphasizing that it is subject to certain restrictions and is not intended for routine access.

💡Taxation

Taxation in the context of NPS refers to the tax treatment of contributions, growth, and withdrawals. The video discusses the tax benefits of NPS under different sections of the Indian Income Tax Act, including deductions for contributions and tax implications of withdrawals.

Highlights

90% of urban Indians over 50 regret not starting retirement planning early.

NPS or National Pension System is a popular retirement scheme in India.

Investors often choose NPS for tax benefits without fully understanding the scheme.

NPS was launched by the Government of India and regulated by PFRDA.

NPS offers two types of accounts: Tier 1 for retirement planning and Tier 2 for investment planning.

A minimum of Rs.250 is required for investment in Tier 2 account, with no maximum limit.

Tax benefits are a significant reason for investing in NPS, with deductions up to Rs.2 lakh in Tier 1.

NPS is open to all working professionals, including government, corporate employees, self-employed, and NRIs.

Investors can choose between active choice and auto choice for investment allocation in NPS.

Active choice allows subscribers to change their asset allocation up to twice a year.

Auto choice has predefined asset allocation strategies based on age, such as aggressive, moderate, and conservative lifecycle funds.

At retirement, 60% of the NPS corpus can be withdrawn as lump sum, with the rest as annuity.

Annuity returns in NPS are typically 5-8%, lower than potential market returns.

NPS provides a pension calculator on their website for estimating future benefits.

Withdrawals from NPS are allowed after 3 years for specific emergencies, up to 25% of total contributions.

NPS falls under the EEE tax category with no tax on investment, accrual, or maturity stages.

Systematic lump sum withdrawal allows for monthly, quarterly, or annual withdrawals instead of a one-time lump sum.

Charges in NPS include account opening, POP charges, and fund management fees.

NPS has limitations in liquidity and lower returns in annuity compared to mutual funds.

NPS is suitable for those seeking a monthly pension in retirement.

Transcripts

According to a study by MaxLife,

90% of urban Indians, who are 50+,

regret that they did not start retirement planning early.

But if we want to do retirement planning, then NPS or National Pension System is a very popular retirement scheme.

Most people invest money in NPS without understanding the scheme due to tax benefits.

But along with some advantages, there are some disadvantages of it as well.

So in this episode, we are going to decode NPS completely.

Hello, I am Mukul Malik and you are watching the Asset Yogi Show.

Before starting the video, let me tell you that our app is coming.

My team and I believe that investing through this app will be very simple.

You can sign up for the app for discounts and early access.

You will find the link in the description below.

Let's first understand what is NPS?

NPS is a pension scheme launched by the Government of India.

It is regulated by the PFRDA or Pension Fund Regulatory and Development Authority.

Initially, it was launched for the government employees except the armed forces in 2004.

But it was opened for all citizens in 2009.

It has two benefits.

First is retirement planning and second is tax saving.

So the question arises where does this money get invested?

As in mutual funds, the money is invested in the stock market and debt.

Similarly, money is invested in the stock market, government and corporate bonds.

But the question arises that is it better than mutual funds?

We will definitely talk about it.

Every subscriber is assigned a 12-digit PRAN number which we call permanent retirement account number.

NPS offers us two types of accounts.

First is tier 1 and second is tier 2.

Tier 1's main purpose is retirement planning and tier 2's main purpose is investment planning.

If we talk about eligibility, any Indian citizen between 18 and 70 years of age can open an account in tier 1.

If we talk about tier 2 accounts, only those people can open who already have tier 1 account

If we talk about lock-in period, there is a minimum lock-in period of 3 years in tier 1 account.

After that, we can do partial withdrawal.

Otherwise, we cannot do any other withdrawal for 60 years.

This is primarily a retirement planning account.

On the other hand, it is not necessary to invest money in a tier 2 account every year.

But whenever we invest money, we have to invest Rs.250 minimum.

Then if we talk about the time of opening the account,

Just as we have to invest Rs.500 minimum to open a tier 1 account,

We have to invest Rs.1000 minimum when we open a tier 2 account.

There is no maximum limit in both the cases.

But yes, definitely because of tax benefits, people keep the maximum amount in NPS limited.

And these tax benefits are the biggest reason that maximum people want to invest in NPS.

So the contribution of the employee in NPS,

we can claim a tax deduction of Rs.2 lakh in tier 1 account.

We do not get any tax benefit in tier 2 account.

That is why tier 1 account is more popular because it gets so many tax benefits.

All working professionals can invest in NPS.

Whether they are government employees, corporate employees, self-employed businessmen,

or even NRIs can also invest in it.

So far we have understood the total features of NPS.

Now the question arises that what are the investment options we have in NPS?

The first step in this is that we have to choose our pension fund manager.

There are 8 listed PFMs in NPS.

The second step is that we have to choose between active choice or auto choice.

If we select active choice, we can make some changes every year

about where we should invest our money.

In auto choice, our money is automatically invested.

And in both the choices, our money can be invested in 4 categories.

The first category is low-risk, i.e.government bonds.

The second category is moderate risk, i.e.corporate bonds.

The third category is high-risk, i.e.stock market.

The fourth category is very high-risk, i.e.AIF(Alternate investment funds)

Also, the money could be invested in REIT as well

Now if we talk about active choice in more detail,

then subscribers can choose their asset allocation between equity, corporate bonds and government securities.

At the age of 50, we can put a maximum of 75% of our money in equity.

After that, it decreases by 2.5% every year.

So when we reach the age of 60, the maximum amount of money that can be invested in equity can be 50%.

And we can change this allocation every year, maximum twice.

Apart from this, the allocation that can be done in AIF, i.e.alternate investment funds,

can be done at a maximum of 5%.

So this is our active choice in which we can make changes every year.

Second, if we talk about auto choice, the entire asset allocation is decided by the pension fund manager

depending on the subscriber's age.

So once you have chosen your option in auto choice,

the pension fund manager will automatically invest accordingly.

So here we also get three choices.

First, we can invest in the aggressive lifecycle fund, which is a little high-risk.

So in the aggressive lifecycle fund, 75% allocation can be done in equity up to 35 years of age.

After that, by the age of 55, it is gradually reduced to up to 15%.

Then the second option in auto choice is the moderate lifecycle fund.

Here in equity, our exposure is further limited.

Up to 35 years of age, maximum 50% of the money is invested in equity.

And by the age of 55, it is reduced to 10%.

Then the third and last option in auto-choice is the conservative lifecycle fund.

This fund is for those who do not want to take too much risk.

So in this, 25% allocation is kept in our equity, maximum up to 35 years of age.

After that, by the age of 55, it is reduced to 5%.

So in auto choice, our equity and corporate bonds exposure are gradually decreased with age.

Because with age, the risk-taking capacity or ability of people is generally reduced.

Generally, according to financial planning, when our equity portion is less, we can take more risk.

So we can keep our equity portion more.

So this financial planning is already incorporated in auto choice in NPS.

So now the next question arises that how do we get our total money on maturity and how much do we get?

So suppose I am taking retirement at the age of 60.

So I will get 60% of my total corpus as lump sum.

And the remaining 40% of the money will be in the form of annuity.

I will get insurance and I will get the monthly money slowly.

But here comes a big drawback.

This 40%, which is being invested in the form of insurance,

and in which I am getting a monthly or annual annuity, I am actually getting returns of 5% to 8%.

On the other hand, the amount of corpus we have collected for retirement,

when this money is invested in the markets, it can give us returns of 10-12%.

Especially if our maximum money is invested in equity.

But if we are talking about 5-7% returns, then these are very few returns.

But of course, it has its advantages and disadvantages.

Its advantage is that we keep getting some money every month.

So in that old age, if people want some money monthly, this can be a good option for them.

But we have to understand that we get very few returns here.

We get only 6-7% returns here.

So this type of option can actually be found in mutual funds.

If we go there, we may not seek insurance at that age.

So now I will show you by calculating this so that we can understand the numbers.

So here you can see that you get a pension calculator on the NPS website.

Here you can first put your date of birth.

So I have taken a hypothetical situation here.

1st January 1990, I have taken a person's age.

I would like to contribute to 5000 per month.

Let's assume that he contributes 5000 per month in NPS

And he wants to retire at the age of 60.

So you can take it up to 60.

And you can take this maximum age up to 75 years.

So you can actually contribute to the age of 75 years in NPS.

I will do it again for 60 years.

My total years of contribution is 26 years.

Because we started investing here at the age of 34.

So 60-34 is 26.

My expectation of return on investment is 10%.

So this 10% is a fair return according to me.

Because our maximum 75% is invested in equity.

And on an average, if we talk about mutual funds,

when the whole portion is invested in equity,

then we can expect returns of 11-12%.

So here I will say that our 10% are fair returns.

We should not expect more than this.

Now see here we talked about annuity.

40% of our minimum is invested in annuity.

So you can increase it.

You can also do it 75. You can increase it as much as you want.

But here I want to keep it minimum.

Let's say I keep it 40%.

And I am keeping the expectation of the rate of return of annuity reasonable.

Here I am keeping my expectation of 6%.

So see here we are getting a total investment of 15.6 lakhs.

In total 26 years.

My total corpus is 74.5 lakhs.

Let's assume it is 75 lakhs.

And my total gain is approximately 59 lakhs.

Now how did the money divide in this?

So out of this 75 lakhs,

you can see that the lump sum portion is approximately 45 lakhs.

And the remaining 30 lakhs amount is being invested in the form of annuity.

From that annuity, the monthly pension will be approximately 14,900.

Now it will depend on which pension fund manager we have.

Everyone can have a different rate of return.

So here in fact I want to show you one more calculator.

And this calculator is also available on the NPS website.

You can also search it on Google.

Otherwise you will find the link below in the description.

So here you can fill all your details.

For example, private sector subscriber.

And I have added age.

Gender male.

And let's assume he is married.

So after that we have added the gender details of the female spouse.

And we have also added their date of birth.

After that we have added the total investment in annuity.

So our total was approximately 30 lakhs.

So I have added this 30 lakhs amount.

I have seen the annuity frequency here.

Now it is considered yearly.

If I want money every year, then how much money will I get?

I have selected the annuity service provider here.

You can select whoever you want.

Whichever your pension fund manager is.

After that, we will enter captcha and submit.

So see I have already filled all these details.

So here we can understand 2-3 terms.

Here one is with return of purchase price.

Understand this carefully.

So whatever money I have put this 30 lakhs.

If I die, then my spouse will get this 30 lakhs at the time of death.

Plus every year I will get the amount of annuity.

Till the death of that subscriber.

If I don't select the option of return of purchase price.

Then this option comes for us.

Where my annuity amount will increase every year.

But after the death of the subscriber.

The spouse or his nominee will not get any amount.

So in the case of return of purchase price.

Our annuity amount is obviously reduced.

But if we don't want this return of purchase price.

Then our annuity amount increases.

So in this case you can see.

In the case of annuity for life.

You will get 2,17,440 every year.

If we talk about joint life annuity.

You will get 2,20,000.

What does joint mean?

It means the spouse will also keep getting in the form of an annuity

Even after the subscriber's death.

Then we also have an option of family income.

If the subscriber dies.

The spouse also dies.

So after that.

The subscriber's mother or father.

If they are living.

Then they can also get money.

But if their children are legal hares.

And both of them die.

Means the spouse and the subscriber.

In that case, the nominees.

In the case of return of purchase price.

The total amount of 30 lakhs will be given

So all these options we have for annuity.

In fact, I will show you a monthly option calculation.

If we select monthly here.

So annuity for life,

We can get around 17,400 every month.

In these cases, only 7% of returns are coming on average.

So it will depend.

Which pension fund manager you are choosing.

And at that time.

What type of returns.

Means interest rates are there in the market.

So it can fluctuate from 5 to 8%.

But overall what we saw.

That we are not getting much returns here.

So generally it is working like insurance.

And we know in insurance we get to see 5 to 8% returns on average.

Now let's talk about

How can we withdraw from NPS?

And can we actually do it or not?

See primarily this is a retirement product.

So the maximum money you have,

You will get it on retirement.

But after 3 years of your contributions.

You can withdraw up to 25% of total contribution.

What is the meaning of total contribution?

Suppose you have invested up to 1 lakh rupees.

And it may have increased gradually and became an amount of Rs 3 lakh

But your contribution is of 1 lakh rupees.

So you can only withdraw up to 25,000 rupees.

And you can only withdraw in emergency cases.

And you can find all these lists on the website.

So what kind of cases are these.

Suppose you want to construct a house.

You want to get your kids married.

You want to get your kids higher education.

There is a medical illness in the family.

So these types of dedicated emergency cases.

You can only withdraw this money at that time.

When we are talking about partial withdrawal.

And of course there is no tax on this partial withdrawal.

Along with this,

During the total investment tenure,

Maximum 3 withdrawals are allowed.

And between withdrawals.

There should be a gap of at least 5 years.

And we should also keep in mind.

That the overall total contribution.

Up to our final withdrawal.

We can only withdraw a maximum of 25%.

And all the portions will be included.

Which we have already withdrawn.

Now let's talk about taxation.

Which becomes a very important portion.

Whenever we talk about NPS.

Because that is why many people invest in NPS.

So here, let's talk about the old regime.

In which we get more tax benefits.

So if we select the old regime.

What benefits can we get there?

First of all we should understand.

That NPS comes under our EEE category.

That is exempt, exempt, exempt category.

Like our PPF or employee provident fund.

They also come under our triple E category.

This means whenever we are investing money.

That is, no tax is imposed on the investment stage.

Then the accrual stage.

That is, when our money is compounded.

We are getting interest on it every year.

Or whatever returns we are making.

No tax is imposed on that too.

And finally when we withdraw our money at maturity stage.

There is exemption at that time too.

No tax is imposed at that time too.

Now there is employee contribution in NPS.

And there is also employer contribution.

So in income tax, we get to see deductions in different sections.

So here first of all our section 80C.

Whose overall limit is 1.5 lakhs.

In that we also get an option of NPS.

Which is covered under our section 80CCD-1.

So here the tax deduction we get.

That is up to 10% of basic salary plus DA.

And here the overall limit.

That is the limit of our total 80C section.

That is 1.5 lakhs.

Now we know that we have a lot of portions in 80C.

Like our EPF, PPF, Sukanya Samridhi Yojana.

Our small savings schemes.

Our mutual fund ELSS

Our Home Loan Principle comes.

Along with that, we also get an option of NPS.

All these options together.

Our total limit is 1.5 lakhs.

But along with this, in 80C,

One more additional section is made.

Especially for NPS.

In which we can add an additional amount of 50,000 in NPS every year.

And we also get tax deductions on it.

Apart from this, there is one more section.

Section 80CCD-2.

In which all our employer's contribution.

In many organizations,

The employer also gives a contribution from his side.

Your total CTC structure is made according to this.

In that also we get an additional tax deduction of 10% of basic salary plus DA.

And its limit is actually more.

Its overall limit is 7.5 lakhs.

And this 7.5 lakhs is our overall limit.

In this our EPF portion, i.e. the portion of the Employee Provident Fund.

This combined makes our limit of 7.5 lakhs every year.

So we have talked about the old regime.

Now if we talk about the new regime.

So there we only get the employer contribution amount.

That is 80CCD-2.

Only this option is available.

All other options are not available.

In the new regime.

Along with this,

How do we get tax on the money collected during our withdrawal?

So our lump sum money.

The money that we get up to 60%.

There is no tax on that.

As it is we are withdrawing, there will be no tax on that.

But the rest of our money is invested.

So the money invested in annuity, there is no tax on that investment.

But the money that we get every month.

It gets added to our income.

So whatever will be our income tax slab.

According to that, our tax will be charged

Now here I will give you one more update.

So this lump sum money that we used to get.

The money that we were talking about 60% at the time of retirement.

Now we can withdraw that money without taking the lump sum.

Monthly, quarterly or annually.

This is called systematic lump sum withdrawal.

So as our mutual fund has SWP.

Systematic withdrawal plan.

So this is also a similar plan.

Where we can make a pension every month.

So if we take this money monthly.

And if we take the money of annuity monthly.

Then we can get a good pension every month.

Now let's talk about the charges.

How much money our pension fund managers are charging from us.

Or how much money we get in the overall national pension scheme.

So we will talk about the major charges.

The rest are minimal charges.

Account opening charges are around Rs.400.

Then there are POP charges.

Which we call points of presence charges.

These get charged around 0.5% on contributions.

So whatever money we contribute every year.

Or we did it in the first time.

0.5% of that are the POP charges.

And it is a minimum of Rs.30.

And there is a higher limit on it.

This means we get a higher limit of Rs.25,000.

So if your total contribution is very high.

Then your maximum charge will be around Rs.25,000.

Apart from this we get fund management charges.

Which are from 0.03% to 0.09% annually.

So these are very small charges compared to mutual funds.

But if we compare it with mutual funds.

Then there are some drawbacks in NPS.

The biggest drawback is that our liquidity is low.

We can't withdraw our money whenever we want.

Of course the purpose of this is retirement planning.

So this product becomes excellent according to that

Because we can't withdraw this money, this may compound.

But those who want high liquidity.

So that they can withdraw that money anytime.

Then mutual fund becomes a better product for them.

Along with this what we talked about earlier.

That our minimum 40% of money goes into annuity.

Where our returns are actually less.

So that also becomes a big drawback.

Because our returns are not coming very well there.

But at the same time those who want their monthly pension.

NPS can be a very good option for them.

Now you can ask your questions related to this topic in the comment section below.

We will definitely try to cover them in YouTube Shorts and Instagram Reels.

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