May 22, 2024
NPS accounts
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Do you want to know about NPS accounts? The national pension scheme account ( NPS) is the pension system that is open to all individuals in India. It invests the contributions of the subscribers into several market-linked instruments, such as the debts and equities and the final pension amount.

In this article, we will tell you about the NPS accounts, their charges, architecture, etc. If you want to get all the details on the NPS accounts, read the complete article.

NPS asset allocation and the Investment choice

Under the NPS, you can choose your asset allocation or outsource it to the NPS fund manager. Opting for the Auto choice in NPS is suggested until you get a good experience and the knowledge of investing in the market-linked investment options.

Active choice

  • In the active choice, the subscriber chooses the desirable split of their NPS deposits between the corporate bonds, savings bonds, equities and government bonds on their own.
  • Here the NPS subscriber is required to give the pension fund managers, percentage allocation, and asset allocation matrix to every asset class of the NPS.
  • Out of the four assets, equity, government bonds, corporate bonds and alternative assets, the equity allocation can not be more than 75% of the corpus, and it is valid up to 50 years of age.

Auto Choice

  • In the auto choice, the lifecycle fund that is selected by you comes under the asset allocation category, with the maximum equity allocation of 75%
  • The funds are rebalanced automatically when your asset allocation gets older towards less equity and more debt.
  • You can change the asset allocation up to two times in the financial year.

NPS calculator

NPS calculator is the online tool that you can use in order to determine the potential investment corpus and future monthly pensions that are created through the deposits into the NPS account till retirement.

This tool features the following fields. 

Date of birth

This field is used to calculate the current age and determine how many years you will make the deposits in the NPS accounts.

Contribution

This field can be bi-annual, annual, monthly, or quarterly and indicates the time contribution that is made to the national pension scheme tier 1 accounts.

Expected return rates

NPS investments are considered market-linked and their returns are not estimated in advance. Thus the expected return rate is used to calculate the future corpus value of the national pension scheme contributions.

The higher the value in the expected return rate, the higher the final size of the corpus.

Annuity purchase 

These percentage figures determine the portion of the future corpus of NPS that is used to buy the annuity and determine the monthly pension after retirement.

Conclusion

This article delivers information on the NPS accounts and their choice. Also, you learned about the NPS calculator here. Hope you understand all the details on the NPS accounts.

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