Last Updated:July 08, 2025, 14:30 IST
NPS is a powerful financial tool. With low costs, flexibility, market-linked growth, and robust tax advantages, NPS deserves a permanent spot in your retirement plan.
NPS is a government-backed pension scheme.
Retirement Planning In India: India has been undergoing a demographic shift for some time now. With rising life expectancy and changing family structures, retirement planning is no longer optional — it’s essential. Unfortunately, most Indians still treat retirement planning as a later-life decision, relying on traditional investment avenues or assuming family support will suffice.
But in a world of increasing medical costs, lifestyle inflation, and nuclear families, a sound retirement plan is a necessity. This is where the National Pension System (NPS) emerges as a powerful solution.
What Is NPS?
The National Pension System is a market-linked, voluntary, long-term retirement-focused investment plan that enables systematic savings during your working years, to build a corpus and generate pension income in your retirement years. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
Kurian Jose, CEO, Tata Pension Management, explains why NPS should be part of your retirement portfolio.
Why NPS Deserves A Place In Your Retirement Portfolio
1. Low-Cost, Professionally Managed
NPS is one of the lowest-cost investment options in India and probably the world. The money is managed by experienced Pension Fund Managers (PFMs) appointed by PFRDA. The regulated structure ensures transparency, accountability, and investor protection.
2. Power of Compounding with Market-Linked Returns
With exposure to equity, corporate bonds, government securities and alternate investment funds, NPS offers potentially superior long-term returns as compared to traditional fixed-income instruments. You can choose your asset allocation based on your risk appetite through active choice option or go with an Auto Choice (life cycle) option that adjusts exposure with age. This is based on an algorithm which reduces exposure to equity as one ages and compensates with increased exposure in debt instruments.
3. Flexibility and Control – A subscriber can do the following changes
• Change asset allocation up to four times a year
• Change your Pension Fund Manager once every year
• Switch between Active and Auto choice options
This allows you to adapt your strategy as your goals or market conditions evolve.
4. Unmatched Tax Benefits
NPS offers tax benefits under both the old tax regime as well as the new tax regime.
This makes NPS one of the more tax-efficient investments available in India.
5. Disciplined Wealth Creation
By encouraging regular contributions, NPS helps develop a disciplined saving habit.
Even a monthly SIP of Rs 5,000 in NPS can potentially grow to over Rs 1 crore over 25–30 years, thanks to the power of compounding and equity participation. This amount along with the savings due to tax efficiency helps one in building a sizeable retirement corpus.
6. Lifetime Pension + Lump Sum Flexibility
At the age of 60:
• Upto 60% of the accumulated corpus can be withdrawn tax-free as a lumpsum or systematically as per fund requirements
• Minimum 40% must be used to purchase an annuity, ensuring a regular lifelong pension
There’s also an option to defer withdrawal till the age of 75, and phased withdrawals of the 60% of the corpus is permitted by Systematic Lumpsum Withdrawal Plan (SLWP).
7. Portability and Digital Convenience
Whether you change jobs or cities, your NPS account stays with you — no need to open a new one. The entire system is digitally enabled, and you can invest, track, and manage your account online.
Even NRIs and OCIs are eligible to invest in NPS, offering an interesting avenue to build a retirement corpus in India.
The National Pension System is a powerful financial tool. With low costs, flexibility, market-linked growth, and robust tax advantages, NPS deserves a permanent spot in your retirement plan.
What Should You Do Next?
• If you don’t have an NPS account, consider opening one today through a registered Point of Presence (PoP) or through eNPS
• If you already have an account, review your fund choice, asset mix, and contribution strategy.
• Encourage your employer to explore Corporate NPS if they haven’t already.
Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst…Read More
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst… Read More
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