IS the NPS good for pension scheme

POSTED BY MadhuBolli ON September 27, 2010 8:30 pm COMMENTS (7)

IS NPS good scheme for pension to start invest at the age of 31 years.

I want to invest in any good pension scheme and I thought as government came up with NPS, I would like to invest on it. Could you throw ideas on this.  What is the NPS tier-1  and NPS tier-2.


Note:- Every year, I started investing in PPF(70k) , SIP (2 lakhs). As of now no kids, so not planned for child policies. Had one term policy(25 lakhs) and paying 3.6 lakhs as EMI for house loan.



7 replies on this article “IS the NPS good for pension scheme”

  1. Milind Kotibhaskar says:

    If you do not have much risk apetite, you can opt for NPS. Compared to any other pension scheme, NPS has two advantages: One is very low expneses and other is safey with equity exposure ( max 50 % ). Even in equity, the money is invested only in Index funds. So you are very safe there.

    Other pension schemes are costlier and riskier, however, considering your age, you can keep on investing in these schemes for more than 25 years and returns you are likely get will be better than NPS.

    Tier 1 account of NPS is the account from which you can not withdraw money and you will get all the money that is in you account at the age of 60. You will have to buy an annuity from this amount and get regular pension. Tier 2 account is same as tier 1 with the difference that you can withdraw money as and when you want from Tier 2 account. You have to have tier 1 account to open tier 2 account.

  2. Hemant B says:

    I agree with Jitendra’s points but my eyes got stuck on this line

    “As of now no kids, so not planned for child policies.”

    Child policies is 2nd worst insurance policies(1st position goes to tension plans oh people still call them pension plan). Child policies are nothing but just emotional attyachaar.

    One more important thing:
    Prima Facia(I don’t know the exact financial picture) your term plan looks insufficient – as you have written your EMI is 3.6 Lakh, your loan amount should be between 25L-35L(My guess). This way your term plan is just able to meet the Liability part, what about protecting future earnings & other goals? 🙁

    1. JayaprakashReddy says:

      Hi Hemant, you said child plans and pension plans are worst. Can you please throw some more light on it, so that others can make proper decision?

    2. Vinay Sarda says:

      All “Financial Planners” , why you all oppose so much for Child ULIP plans. Does any Equity MF offer cover if Parnets die to there Childerns. Apart from that they Pay all the future Premuims (its ok that they charge for the same), which are Allocated in right way in Stock Markets in absence of parents which is the main benefit in CHILD ULIP PLAN. There various type of Option Like P/E fund , Trigger Portfolio Strategy which helps from Ups / Downs of the Stock market. And fetch better Returns from the investment. (No Equity MF gives this benefits).

      How can child allocate the amount it receive from insurance companies in term plans even it will managed by say its ‘guradians’ , Rather then believing others and there startegy of investing its better to stay with the Insurance companies you had taken Child Ulips.
      And in the long run say 10 years or more Ulips can fetch better returns than Equity MF.
      All Ulips charge not more then 1.35 % FMC (LIC charge only 0.80 % )and taking all other charges & bonuses combined it will not be more then 1.5 % or so .

      Whereas Equity MF charging upto 1.75 % to 2.5 % . (according to fund size)
      Think personally in this matter and reply .

  3. jitendra solanki says:

    NPS is a good option for retirement given its low cost structure. The best part of this scheme is you can change your fund managers if you are not satisfied with their performance.The only factor you have to consider is that maximum equity exposure is 50%.So You will have to supplement this with other investment Like SIPs in Equity Funds to reach the desired corpus.

    Tier-1 is option with no withdrawal facility before retirement age and the whole amount is available for pension at age 58-60.In Tier-2 you can withdraw part of the corpus with maximum limit of 40% and the rest has to be received as pension.(I would be better off with tier-1).

    Your investments looks good and well allocated within equities and debt.

  4. JayaprakashReddy says:

    NPS is still evolving. compared to other pension schemes I felt this is much better than others. When I did some research regarding pension schemes for my self I found ICICI pension maxima with trigger portfolio and HDFC pension super are good. I’ve selected these based on several factors such as FMC charges, initial charges, and other charges as well as their performance till now. In both the pension schemes I’ve taken without insurance (In HDFC they have minimum rule for 1000 sum assured).

    Regarding explanations for NPS tier-1 and tier-2, you will get the clear info at below link.

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