National Pension Scheme (NPS) is a voluntary pension scheme offered by the government of India. NPS subscribers, usually in the age bracket of 18 to 65 years, can make voluntary contributions to the scheme in order to build a retirement corpus. This scheme aims to promote systematic saving amongst the senior citizens of the country. NPS is regulated by the Pension Fund Regulatory & Development Authority (PFRDA).
The contributions made to the NPS is invested in a number of investment options and in turn get attractive market linked returns. The scheme does not offer a fixed interest rate. The interest rate is around 12% to 14% which is considered to be higher than the interest rates offered by other savings schemes.
The NPS scheme offers multiple investment options and also gives the subscribers the option to choose a pension fund manager of their choice. The subscribers can choose to switch their investment options and fund managers during the tenure of the scheme, subject to regulatory restrictions. The returns on NPS is based fully on the market rates.
Subscribers contribute to the scheme regularly or periodically and upon reaching retirement will receive a portion of the retirement corpus in a lump sum while the remaining has to be used to purchase an annuity that provides monthly income to the subscribers for financially managing their retired lives.
The New Pension Scheme is gaining popularity as an avenue for investment because of it’s safety, security and rate of returns. There is no specific interest rate that’s been set for the NPS scheme. The reason for this is that the scheme picks and choose various different investment options. As a benchmark to compare other investments with, the NPS scheme earned interest rates of up to 12% to 14%, depending on the scheme chosen.
There are projections that the scheme may earn more than other similar investment options, but no solid interest rate figure has been established. It is safe to assume that the rate may not be as high, but will be higher than other schemes and plans. The interest rate for NPS or New Pension Scheme is not set as a definite amount, as the investments change.
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