NE BUSINESS BUREAU
AHMEDABAD, OCT 4
Research by investment analysts reveals that the Tier-II account of the National Pension System (NPS) has outperformed most fixed-income investments. With 11.11 percent returns in the last one year, Scheme G of NPS Tier II has outperformed liquid debt mutual funds and savings bank fixed deposits by a wide margin.
Liquid funds on an average have delivered around 5 percent in the last year. Savings bank fixed deposits have also come down steeply to around 5 percent. SBI FDs of 180 days to less than one year fetch 4.4 percent. Deposits with maturity between 1 year and up to less than 2 years will give 4.9 percent.
In the last three years, the NPS Tier II account has given an annualised return of 9.53 percent and in the last five years, average returns stood at 10.20 percent.
According to the Pension Fund Regulatory and Development Authority (PFRDA), the National Pension System (NPS) offers two types of accounts: NPS Tier I and NPS Tier II. Tier I is a compulsory pension account while Tier II is an optional facility provided to NPS Tier I account holders which can be opened at the discretion of the subscriber.
Benefits of NPS Tier II
Ease of account opening
You can activate your NPS Tier II account offline or online through your Nodal Office or NPS Mobile App, provided you have an active and operational NPS Tier I account. NPS Tier II account can be opened with an initial contribution of Rs 1,000 and the minimum subsequent contribution amount for this account is Rs. 250. With the activation of NPS Tier II account, subscribers are free to invest / withdraw whenever they wish to, without any limits.
Flexibility to invest
An NPS Tier II subscriber is free to select any of the registered Pension Fund (PF) and Investment Options as like in NPS Tier I account to get the benefit of professional fund management to generate superior returns.
Optimal Returns
NPS is a market-linked product and depending on risk appetite of the subscriber, he/she can decide a suitable asset allocation pattern (among Equity, Corporate Bonds and Government Securities) within the prescribed limits to derive optimal returns.
Low Cost
NPS carries the benefit of being the lowest cost pension product in the world. The overall costs in NPS are the lowest due to economies of scale in operations of the system architecture. Also, the accumulation of the retirement corpus over a period gets accelerated on account of the compounding effect and nominal charges borne by the subscriber.
Tax benefits
Exclusive tax benefits on contributions made to Tier II are available for Central Government subscribers subject to lock-in of 3 years, up to Rs 1.5 lakhs under section 80C of the Income Tax Act, 1961. The capital gains arising from Tier-II investments are taxable at a marginal rate.
Ease of access and transfer
NPS Tier II account can be operated (including withdrawals) through online/Mobile App. Subscribers are also enabled to transfer funds from his/her Tier II account to NPS Tier I (pension account).
