The New Pension Scheme is just like the old pension scheme launched a few years ago. But, the Finance Minister probably realised that it was not a major draw for investors and decided to modify the scheme with some super benefits in the Union Budget 2015.
What has Changed Under New The Pension Scheme or NPS?
The other benefit that one gets is that one can now invest in the scheme in equity as well. So, you can make a choice if you want to invest in equity or debt depending on your own risk profile, age etc.
But, the limit here is capped to 50 per cent not more to probably protect the interest of investors.
While some are skeptical others feel that it would help to channelise savings into the stock market, which could be a good move, since stocks are highly under owned in India.
Finer Points of the NPS or the New Pension Scheme
The New Pension Scheme or the NPS is governed by the Insurance and Regulatory development of India or IRDA. Each employee is given a retirement number and he or she can track his investments accordingly.
At the moment you can also use the print out of your statement for claiming tax benefits under the pension Scheme.
The forms for investment are available at the NSDL website and one can visit here
Should One Invest In The New Pension Scheme?
While there are tax benefits that one does get in the form of an additional Rs 50,000 this year, that should not be the only consideration for investment. Look for creating a steady income in terms of retirement at a later stage.
Towards this end, though one can invest in equity this year it is not advisable to create a pension by investing in equities. Of course, there is a cap of 50 per cent, but still it may not be a good proposition.
Also, investing in the equity fund means it would be invested in the same Nifty stocks as their weight. Again, a straight jacketed mechanism may not help individuals to get higher returns by parking their money here.
Clearly, there is nothing much the New NPS has to offer, except the tax benefit and also the ability to invest in equities.