NPS – New pension scheme or National pension scheme….does attract a lot of attention from many investors. However the jury is still out on whether one should invest in it nor not invest.
One major (I mean MAJOR) DRAWBACK is you have no clue what will happen once you finish the accumulation stage and go on to the withdrawal stage.
Let us say you have accumulated Rs. 500 lakhs in a NPS account. They allow you to withdraw say 50% of the amount and the balance has to be invested BACK in an annuity. Let us say you ARE FORCED to invest Rs. 250 lakhs in an annuity which pays Rs. 11,000 per month as a pension…looks good? Well depends on what you are capable of doing with your own money!
My suggestion is very simple. If a person has accumulated money in N P S, he should be allowed to withdraw HALF and the other half HE/SHE should be allowed to transfer to
– Senior Citizen Yojana or PPF. This will ensure that my corpus runs only the risk of inflation – from the age of say 70.
If certainty is brought to the end use of the NPS, I guess more people will be willing to save / invest in the NPS.
WANT YOUR FEEDBACK please…wish to forward the views of the people to the current powers that be in the NPS. Government will be more than happy to make this work….any other ideas?
Based on the feedback that I have got for this post (I did the original post on April 25) I need to clarify (this is dated 7th May, 2010) that what happens to the bulk of your money is more or less the same in any pension plan. So whether it is a Lic pension plan, a sbi pension plan, a Kotak pension plan, a Hdfc pension plan, a Max New York Life pension plan, a sbi life pension plan, a icici prudential pension plan, it does not matter.
Also the end use of the pension amount is the same immaterial of whether it is a traditional / classic pension plan or a unit linked pension plan. So whether it is a sbi ulip, Kotak ulip, Birla ulip, a Hdfc ulip or a lic ulip, reliance ulip, icici prudential ulip – if it is BOUGHT AS A PENSION plan, the end result is the same.
The Pension accumulator and ‘payer’ gets to keep A BIG CHUNK OF THE CORPUS and pay you a pension – and it may be very different from what a pension calculator said you need to live! So please be careful about ANY PENSION plan – not just the NPS!
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