When the NPS was launched I was one of those who said ‘let us wait to see it operate’. I am happy that I did not open an NPS account. Really thankful for the wait.
From a real cost of .0009 to 0.25% – is a huge jump – of almost 300%. Not fair. I am happy to note that this jump came so soon…and I did not have to wait too long to see this bad news. I can say in hindsight that I was always expecting it!
0.25% is a low figure but there are private sector amcs which have index funds at this price. One fund that I have seen is IDFC index fund. So if you do a SIP in Idfc index fund you should be able to get the same benefit of being in a NPS.
What will you do with the debt portion?
Well I am against MF debt investment -EXCEPT FOR deferring your tax and tax arbitrage. So if you have about say Rs. 3 lakh per annum, put Rs.1L in PPF and Rs. 2L in Idfc index fund. This combination will surely beat the NPS.
How much can you put in PPF? This is a little tricky now – but Rs. 2 lakhs between husband and wife should not be a problem. Then you have 2 minor children and a HUF….so that is also not an issue.
The only spanner in the works is if the government introduces a separate deduction of say Rs. 3L over and above the 80C. My educated guess is even if such a provision is made, it will include the PPF. So presumably the limit in PPF will be raised accordingly. For your 80C use your home loan repayment, insurance premium, children school fees, provident fund, etc. and for this new section use your PPF, and the balance goes to the IDFC index fund. Simple.
Also the NPS comes with a huge lock in…which suave customers may not need.
So NPS, Sayonara. Auf Weidersehn!
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