As we are all aware, we retire around age of 60. Employees retire around this age and businessmen handover major responsibilities to their heirs. Improvement in medical services has assured that we live for 20-30 years(some even longer) after this retirement age.

At this age, it’s a dual paradox – active income decreases after retirement but expenses remain same(or increase due to medical conditions associated with old age). So, what’s the solution? The solution is maintaining flow of income in these golden years.

Financial planners have lots of investment products for this – Mutual Funds, Public Provident Fund(PPF), small saving schemes, other investments(Real Estate, gold etc). But an excellent scheme which has been largely ignored is NPS(National Pension System). Commonly known as New Pension Scheme - NPS is an excellent investment avenue which can take care of steady income flow in these golden years.

A major reason for this scheme not having gained sufficient popularity is that it’s fairly new as compared to other investment options(this scheme is only a decade old). Other reason is that the agent commission is very, very low and hence agents are not much interested in pushing it. I will cover some details below for NPS.

NPS is a contributory pension scheme which is highly efficient, low-cost, tax-friendly and technology driven system to save small amounts today so as to build a fund for life’s second innings. It was started in 2004 for Central government employees but was later extended to cover State government employees and subsequently all citizens(salaried or self-employed). Presently any Indian citizen between 18 to 65 years of age can subscribe to this scheme.

A subscriber can contribute funds to this scheme in his working years. These funds are invested by reputed Pension Fund Managers in various options(Equity, Corporate bonds, Government Securities etc). Thus a reasonable Corpus gets made by the retirement age. The subscriber has to then approach a Pension provider(or Annuity Service Provider like LIC) at this retirement age and can get good pension for his last years. A part of corpus can also be withdrawn at retirement age. For example, if a young man starts investing Rs 5000/ per month from the age of 21 till 60 and the scheme earns 11% pa return, the corpus at age of 60 will be Rs 3.88 crores. This is the magic of compounding though normal investment cautions remain(nobody can guarantee the rate of return though Pension Fund Managers try their best. Volatile markets scare the general investors but can give decent return over long-term). To make the scheme popular, government also gives tax benefits.

This account can be opened thru your bank branch, designated Service providers thru Points of Presence(POP) or very simply online thru websites of CRA(Central Record-keeping Agency) like NSDL or Karvy. Mobile app allows you to track your investments using PRAN(Permanent Retirement Account Number). Since all constituents(Pension Fund Managers, CRA,

Pension provider etc) are big and reputed institutions, the subscriber’s interests and funds are secure. More information regarding NPS can be seen from sites of NSDL, Karvy, NPS Trust etc.

Young investors – especially who are starting their careers – should definitely look at this scheme for their secure future.