Examining the Nitty-Gritty of NPS

The main intention of National Pension System (NPS) is to provide social security to the people of the country during old age. Pension Fund Regulatory and Development Authority (PFRDA) acts as the regulatory body for NPS. The NPS offers two kinds of account: Tier I Account and Tier II Account. The tax benefit is linked only to Tier I Account. The driving forces behind the NPS are the increase in the cost of living, a rise of the nuclear family, increased longevity and ensuring monthly income in old age when one is not as productive as in youth. In this backdrop, the study has made an endeavour to highlight the critical issues of NPS in terms of taxation, return potential, cost, flexibility etc. It is observed that all the Pension Fund Managers (PFMs) succeeded in delivering a return in excess of 11% during 2-year, 3-year and the 5-year period for the Central Government and State Government Schemes. Average annualised returns of aggressive investors are the best in 1-year and 5-year time period, whereas average annualised returns of ultra-safe investors are the best in the 3-year time period. All stakeholders: the government, employers and employees have a role to play in fostering a conducive pension environment in India. The government needs to consider higher tax incentives, consistent tax treatment of various pension plans and transparency in regulations to augment pension coverage in India.