National Pension System (NPS)
Retirement is a phase most people postpone thinking about. Daily expenses, lifestyle upgrades, and short-term goals often take priority. But the truth is simple: one day, your income will stop, and your expenses will not. Planning early is not optional—it is essential.
The National Pension System (NPS) is one of India’s most efficient retirement planning tools. At Moneybeans, we help clients incorporate NPS into their long-term goals so that their later years are supported with stability and dignity.
What is NPS?
The National Pension System is a voluntary, government-regulated retirement scheme managed by the Pension Fund Regulatory and Development Authority (PFRDA).
It follows a defined contribution model, meaning you invest steadily during your earning years, and these contributions grow over time through market-linked returns.
Upon retirement or attainment of age 60:
- A maximum amount of 60% of the accumulated corpus can be withdrawn.
- The remaining 40% must be used to purchase an annuity that provides a monthly income throughout your retirement.
However, if your total accumulated NPS corpus is ₹5 lakh or less on retirement, you may withdraw 100% as a lump sum without being forced to buy an annuity. Also, if you don’t withdraw at 60, you can continue NPS until age 75. During this period, you can defer lump-sum withdrawal and/or delay the annuity purchase.
This structure ensures that even when regular income stops, financial independence continues.
How Does NPS Invest Your Money?
Your contributions are managed by professional fund managers and invested across:
- Equity
- Government securities
- Corporate bonds
You can choose your asset allocation (Active Choice) or let the system rebalance automatically based on your age (Auto Choice).
Because the investments are market-linked, returns vary—but over long periods, NPS has proven to deliver disciplined, steady retirement growth.
Types of NPS Accounts:
You can open two types of accounts under NPS:
- Tier I Account (Primary Retirement Account):
- Mandatory for all NPS subscribers
- Minimum annual contribution: ₹6,000
- Withdrawals restricted
- Enjoys an additional tax benefit of ₹50,000 under Section 80CCD(1B).
- This is the true retirement-building account.
- Tier II Account (Voluntary Savings Account):
- Can only be opened if you already have a Tier I account
- Minimum contribution: ₹250
- No withdrawal restrictions
- No tax benefit.
This account works like a flexible investment option for those who prefer liquidity.
Why NPS Matters in Your Financial Plan?
NPS plays a critical role in building a stable retirement corpus for several reasons:
- Diversified Portfolio
Your money is spread across equity, bonds, and government securities, creating a balanced structure suited to long-term growth.
- Low-Cost Structure:
NPS is one of the lowest-cost retirement products in India, which helps your money grow faster over time.
- Tax Efficiency:
Along with the standard deductions, the additional ₹50,000 benefit under Section 80CCD(1B) directly supports annual savings.
- Regulated and Transparent:
Since it is overseen by PFRDA, NPS offers high transparency, accountability, and safety.
At Moneybeans, we often recommend NPS as part of a core retirement plan, especially for salaried individuals who want long-term discipline with tax advantages.
Frequently Asked Questions
Yes. It is a government-backed scheme regulated by PFRDA, offering strong oversight and transparency.
No. NPS accounts are strictly individual.
- Choose Active if you understand asset allocation.
- Choose Auto if you prefer a lifecycle approach that adjusts risk automatically with age.
The Moneybeans View
Retirement needs deliberate planning, not last-minute decisions. NPS is not just an investment product; it is a disciplined framework that ensures you build a sustained, dependable income stream for your future.
At Moneybeans, we incorporate NPS into your financial goals, asset allocation, and long-term wealth strategy, so your retirement years are not just comfortable, but dignified and independent. A secure future is built today. Let NPS be one of the pillars of that foundation.
