Demerits of NPS (National Pension Scheme)

The National Pension Scheme (NPS) is brought into action in the welfare of both the public and private sector. The subscribers of the NPS can choose to have an account according to their interest. this scheme also consists of some disadvantages:

Limited Exposure to Equities: It is seen that the value market offers better return throughout a more drawn out timeframe which is commonly higher when contrasted with other fixed bring instruments. Asset Allocation to Equities has been confined to a limit of 75% of your speculation. This may not be a significant issue with momentary speculators yet for youthful people in their 20's-30's, this implies a possible loss of occasion to amass more abundance through the most extreme presentation to the Equity Market.

Limitation on Withdrawal: One of the significant downsides considered by many is the limitation forced on withdrawal of your commitment. Just 25% of the all-out speculation might be removed anytime (to address explicit issues) additionally debilitate numerous to put resources into the plan. On the off chance that the whole venture is removed before the age of 60, at that point, 80% of the asset is to be used in purchasing an annuity plan. This makes it a viable arrangement for some people.

Tax on Maturity Proceeds: According to the present laws, the funds would be taxed at withdrawal. As per the latest budget in 2019, Lump sum withdrawal of 60% is made tax.

Mandatory Annuity: Another lag is the limitation on withdrawal from Tier- I account, the primary account for pension savings. On maturity, one can withdraw only around 60 per cent funds; the rest has to be used to buy an annuity, the returns of which are not tax exempted.

Account Opening Restrictions: The individual can maintain only a single NPS account in its lifetime. Although the PRAN is easily ported across the geography and jobs, only one single individual will obtain a single PRAN.

Investment Restrictions: The subscriber can’t invest more than 50% of its total investment in the NPS account towards equities.

No Guaranteed Returns: Though NPS is a government scheme, the corpus is created according to the returns that are generated under the government securities, corporate bonds, and equity. Therefore, market fluctuations can affect the returns adversely.

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