1. Charges: In respect of the charges, NPS subscribers are charged only nominally that means fund managers reap only a meagre amount, which is the main reason why the product is marketed as aggresively. On the other hand, in case of the insurance pension plans, considerable charges are deducted.
2. Covers otherwise deficit that might result in retirement corpus build-up: NPS is suggested to be efficient in bridging the deficit that might result during the process of retirement corpus creation
3. Plans under the retirement scheme: For subscribing to the NPS scheme, an individual needs to compulsorily maintain the Tier-I account with a minimum investment requirement of Rs. 6,000 on an annual basis until attainment of 60 years of age. The other account that can be maintained to meet liquidity requirements under the scheme, Tier-II account, comes with no stipulation concerning the minimum deposit amount or withdrawal as far as the minimum amount balance requirements are met.
4. Fund allocation and return: As far as the return from the NPS scheme is concerned based on the risk profile and return consideration, investor can opt for any of the four available investment options; including option to allocate a high percentage in equities, fund allocation primarily in G-securities, investment through the auto-allocation option or in a portfolio with average risk.
On the other hand, mutual fund pension plans in that invest 40% of the total corpus amount in equity and remaining in G-securities, investors can assume equitable returns from the investment.
Insurance pension plans towards which the insured pays a regular sum are not flexible and provide only a meagre return of 4-5% in either of the case when the claim is made on the death of the insured or on maturity.
5. Monthly Annuity: Also, another provision in the NPS scheme that works in its favour is the creation of the annuity with the amount left after the investor withdraws the allowed 60% of the funds, which thus entitles the subscriber to a certain regular payment during the golden years in lieu of the lump sum amount.
6. Withdrawal: Tier-I plan of the NPS scheme restricts withdrawal from the fund until the attainment of 60 years of age and hence a sufficient corpus can be accumulated over time which can though be kept intact for the right objective of meeting one's financial needs during retirement.
In case of mutual fund pension plans, withdrawal or regular pension option as dividends is available one's the investor reaches 58 years of age. Also, earlier exit or withdrawal from the scheme is restricted through the levy of exit load. Know more about mutual fund pension plans.
7. Taxation benefit: The total amount invested in the mutual fund pension fund is eligible for claiming tax deduction u/s 80C up to a maximum amount of Rs. 1,00,000 of the Indian Income Tax Act 1961. But despite the provided benefit u/s 80C, such products being diverted towards to debt owing to a higher debt portion in the portfolio are tax inefficient.
Such a benefit is not available in case of NPS scheme and investor is taxed on redemption.
So, as none of the product turns out to be efficient in all respects, the new mutual fund pension plans, NPS scheme exclusively conceived to meet retirement needs together with usual PPF and EPF products in the basket can be considered to be good bet.