The New Pension Scheme (NPS) has finally arrived. It was opened to the general public on May 1, 2009. I did get a few calls – asking questions like ‘Can I invest in NPS?’, ‘Should I invest in NPS’ and ‘What is NPS?’. Well I guess their initial campaign paid off - the full page color ads and coverage in the television media did what it was supposed to - generate awareness.
So in this blog I will try and bring in a little more clarity for those who are keen to know more about the NPS.
Highlights:
- This is a government-regulated pension plan.
- It is on the lines of ‘401k – retirement plan’ in the US.
- Market consists of equity, corporate bonds and government securities.
- Funds will be actively managed by six AMCs (asset management companies) - Kotak, SBI, Reliance, UTI, IDFC and ICICI Prudential.
- AMCs will make investment decisions under guidelines issued by the Pension Fund Regulatory and Development Authority (PFRDA)
- The investor is free to choose a mix between:
- Equity (E)
- Corporate bonds (C )
- Government securities (G)
- There is a ‘lock-in’ / binding period till the age of 60.
- It is open to anyone (citizen of India, resident or non-resident) between age 18 and 55 years.
- Minimum investment per annum - Rs 6,000. No upper limit.
- Minimum contributions per year are four.
Downsides:
• Returns at maturity are taxable (unlike PPF, EPF)
• There are no guarantees. Returns are market determined
• Costs can be high for those investing the in the region of the minimum amount (per annum) only. Hence it is not a good option for the small saver. The more you invest the more cost-effective it is.
• Maximum limit in equity (E) is capped at 50 percent.
My advice to all those interested is:
• The intention behind the scheme is very good.
• The PFRDA still needs to give some clarifications. Wait till the new government is in place and announces the budget, wherein hopefully it will set to rest all doubts especially on the EET (exempt-exempt-tax) front.
• Don’t rush into investing in the NPS.
• This cannot be your sole investment for retirement. Talk to your Certified Financial PlannerCM before taking the plunge.
Showing posts with label new pension scheme. Show all posts
Showing posts with label new pension scheme. Show all posts
Tuesday, 5 May 2009
Wednesday, 1 April 2009
New Day. New (financial) year. New Horizons. New Hopes.
Last night as I lay on my bed to sleep, I could not help but think of the (financial) year gone by and what lies ahead in the new one.
Thoughts (of new tidings) kept popping into my mind. Here are some of them that I would like to share with you:
• Access your money through all ATMs: No more waiting in queues (hopefully) at ATMs. From today I can walk into any ATM and withdraw money without being charged by my bank. This should have happened long ago. But better late than never. I could never digest the fact that I have to pay to withdraw my own money.
• Save money, buy the Nano: From today, the Nano would be displayed in all showrooms and later this year, the roads will be full of them (at least I hope for Tata’s sake considering the fact that the last financial must have been his worst ever in terms of luck).
• New government, new rays of hope: By the end of the current quarter, we should have a new government in place. And I hope it is a more ‘functioning’ government. Not a paralyzed one.
• Power to the youth: For millions of young people this election would be their first. I hope they all go out and exercise their right.
• New investments: Time to start fresh SIPs in ELSS (tax-saving) funds.
• Stock markets should start looking up: I think we have seen the worst in terms of the fall in the markets in 2008 - from 21000-odd levels in January to 7700-odd levels in October. This financial year is definitely going to be better. My personal feeling is that things should start looking better from Q3 / Q4 of FY10.
• My new initiatives: I have started some new initiatives to grow my business and I hope they will fructify this year. I hope to take a gigantic leap forward this financial year. Enough of blaming the markets. I will develop new and out-of-the-box ideas to tap fresh clientele.
• New Pension Scheme soon: The New Pension Scheme was supposed to have started from today. But now we will get to know more only in June after the elections are over. This will mark a big leap forward for the Indian financial markets. For investors, this is one scheme to look forward to.
It’s quite rightly termed as the new financial year, since all the things that begin today seem to be related to money and finance. Here’s wishing you a very prosperous new financial year!
Thoughts (of new tidings) kept popping into my mind. Here are some of them that I would like to share with you:
• Access your money through all ATMs: No more waiting in queues (hopefully) at ATMs. From today I can walk into any ATM and withdraw money without being charged by my bank. This should have happened long ago. But better late than never. I could never digest the fact that I have to pay to withdraw my own money.
• Save money, buy the Nano: From today, the Nano would be displayed in all showrooms and later this year, the roads will be full of them (at least I hope for Tata’s sake considering the fact that the last financial must have been his worst ever in terms of luck).
• New government, new rays of hope: By the end of the current quarter, we should have a new government in place. And I hope it is a more ‘functioning’ government. Not a paralyzed one.
• Power to the youth: For millions of young people this election would be their first. I hope they all go out and exercise their right.
• New investments: Time to start fresh SIPs in ELSS (tax-saving) funds.
• Stock markets should start looking up: I think we have seen the worst in terms of the fall in the markets in 2008 - from 21000-odd levels in January to 7700-odd levels in October. This financial year is definitely going to be better. My personal feeling is that things should start looking better from Q3 / Q4 of FY10.
• My new initiatives: I have started some new initiatives to grow my business and I hope they will fructify this year. I hope to take a gigantic leap forward this financial year. Enough of blaming the markets. I will develop new and out-of-the-box ideas to tap fresh clientele.
• New Pension Scheme soon: The New Pension Scheme was supposed to have started from today. But now we will get to know more only in June after the elections are over. This will mark a big leap forward for the Indian financial markets. For investors, this is one scheme to look forward to.
It’s quite rightly termed as the new financial year, since all the things that begin today seem to be related to money and finance. Here’s wishing you a very prosperous new financial year!
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