National Pension System: More people aged 35 plus join NPS; Are they going wrong?

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Published: October 29, 2019 12:17 PM

National Pension System (NPS) Joining: It seems more people aged 35 or above are joining NPS.

nps joining rulesMore people aged 35 years or more have joined NPS in September. Representational image/Pixabay

National Pension System (NPS) Joining: It seems more people aged 35 or above are joining NPS. The latest data released by Pension Fund and Regulatory and Development Authority (PFRDA) shows that as many as 3926 people aged 35 or more joined NPS in the non-government (Corporate) sector in September 2019. In the Central and State governments, their number was 1045 and 13,187 respectively during the entire month. The number of new joiners in the age group of 22-25 years was just 1733 in the Corporate Sector, 9222 in state government and 2282 in Central government sector. In the 26-28 years age group, the number of new joiners in Corporate Sector was 1593, 2058 in Central government and 7762 in the state government. The number of new joiners in the 29-25 years age group was 2334 in the corporate sector, 14,803 in state government and 2070 in the Central government. It is interesting to note the number of new joiners in 29-35 year age group is more than the 35 plus age group in state government.

The NPS subscriber numbers also show that it is not getting very popular in the non-government sector, where most of the new jobs are being created. Here too, the number of new subscribers in the age group of 35plus years is more than double of those joining 18-21 years, 22-25 years and 26-28 years.

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Experts attribute the reason for more people joining in the higher age group to increasing popularity of NPS as a tax-saving tool beyond the 1.5 lakh limit of Section 80C of the Income Tax. NPS subscribers get additional tax benefit of Rs 50,000 beyond the Section 80C limit. So, an NPS subscriber can avoid paying tax on income of Rs 2 lakh after exhausting the Section 80C limit.

However, NPS should not be seen just a tax-saving tool. It is a government-backed instrument for retirement planning. One can make the most of it by joining as early as possible as the NPS final returns depend on the total amount deposited by the subscriber over the years and the income generated through its investment. Naturally, early starters will be at an advantage as they will be in a position to accumulate a larger corpus.

“The greater the value of the contributions made, the greater the investments achieved, the longer the term over which the fund accumulates and the lower the charges deducted, the larger would be the eventual benefit of the accumulated pension wealth likely to be,” PFRDA says in an official document.

NPS investment is independent of contribution to any other pension fund.

Total NPS subscribers in 35 plus and 29-35 years age groups are 24,26,523 and 22,67,966 respectively. In contrast, total subscribers in 26-28 years and 22-25 years age groups are just 7,10,004 and 3,41,618 respectively.

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