Conquer your retirement fears

A practical guide to using the NPS to plan a prosperous retirement

- Aakar Rastogi, Ashish Menon & Agnisheik Chatterji

It’s true that while most of us daydream of retirement, only a select few actually plan for it. If a 2022 survey conducted by the World Economic Forum is to be believed, three out of five Indians fear their savings will exhaust within a decade into their retirement. But you, thankfully, don’t need to panic because we’ll introduce you to the National Pension Scheme (NPS).

What is NPS. This government-backed pension-cum-investment scheme allows all Indian citizens between 18 and 70 to build a retirement corpus in a tax-friendly and affordable manner. While you can regularly invest each month until 75, you have the option to withdraw up to 60 per cent of your corpus upon retirement at age 60. The remaining money is converted into an annuity, providing you regular income in your silver years.

The best NPS plans

Right off the bat, we’d like to point out that there are four schemes and 10 pension funds. The four schemes are:

● Equity

● Government securities (g-sec)

● Corporate bonds

● Alternative Investment Fund (AIF)

Of them, you only need the first three. The last one–AIF – can be avoided. In any case, it has a 5 per cent cap. As for the 10 pension funds, we suggest you give four of them (Aditya Birla Su Llife, Tata, Max Life and Axis) a pass for now, as they are fairly young compared to the others that have been around for nearly a decade. Now that you know the basic makeup of NPS, let’s look at which pension funds work best under different schemes.

Equity