National Pension System ( NPS) - potential saving and investment tool

National Pension System tier- 2 account seems to be a good investment option. While the tier- 1 account is a rigid in terms of withdrawal ,etc, Tier -2 seems to be a good option.

It's mandatory to have a tier-1 account in order to open a tier -2 account. If you don't want to park a bulk of amount in tier- 1, you can go with the minimum contribution to tier-1 (Rs. 6000/-p.a) and contribute the other portion to tier-2 account.
( subject to certain conditions you would be getting additional contribution of Rs.. 1000 from the government for the first three years , if your annual contribution is below Rs. 12000 p.a.

Advantages of NPS-
1. Low cost.
2. Option to choose your fund manager from 6 options.
3. Falls under EEE scheme.
4. Regular saving and investment tool.

Disadvantages of NPS-
1. No auto debit facility/ electronic transfer facility as of now ( as far as i know you can best give an instruction to transfer from tier-2 to tier-1 account). It takes a while when your cheque amutn is reflected in our statement of transaction( it may probably take a while to stabilize)
2. There is a cap of 50% for investment into equity .( probably a disadvantage for the aggressive investor).

Any day , I would opt for a tier-2 investment than going in for a balanced fund considering the cost alone.

Please note:- No one will be coming to you to sell this like a mutual fund or ULIP. SO, take that little bit of self- initiative to open the NPS account.

NPS is called by people as new pension scheme , national pension scheme, etc., but the official site calls it as National Pension System.

if you need more details on NPS

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