Reasons Why NPS Needs More Attention As A Retirements Product

National Pension Scheme though launched as a retirement product to cater to government employees first and then for all others, the avenue is largely seen as a tax-savings product.

Here are reasons people should give more attention to NPS as a retirements product:

1. Annuity payout does not attracts higher taxation:

For the 40% corpus, at the retirement, the investee has to necessarily buy annuity which shall take care of the investee's income stream during sunset years.
To understand it say one accumulates Rs. 1 crore in his or her NPS corpus of which Rs. 40 lakh has to annuitized at 6-7%, providing Rs. 2.4-Rs. 2.8 lakh. And even if one has investment income from other instruments, careful and planned withdrawal might reduce one's tax liability to almost nil.

2. Annuity takes care of your fixed income need:

Though for some the annuity mandate can be a pain point as it reduces the flexibility with investment being made into low-yielding annuity plans. But this is the sole product that thinks and works out for your retirement fund needs.
So, regular income is a highly rewarding benefit that many may fail to reap on their own.

3. NPS can be used in combination with other products to meet your retirement goals:

If someone is investing considering goal-investing in mind, one may not need to dip into NPS savings. Also, while investment in any of the avenues should be a careful and watched out exercise as there are liquidity and other constraints, you can even consider other investments such as PPF, EPF etc. for better meeting your retirement fixed-income needs.

Also, a mix of debt and equity can be rewarding in a longer run for the investor subscribing to the scheme. 

4. NPS Tier II account to offer you liquidity:

For NPS Tier II account with a lock-in of 3 years you are even extended the flexibility to make withdrawals and deposits as and when you feel to be suitable.

However some of the constraints of NPS:

Investments in NPS to be made until 60 years so the investment tenure can be longer for those who start early.

Annuity pension is taxable, but the 60% available as lump sum amount tax-free.

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