Pension Scheme– Retirement is such a turning point when after a lifetime of hard work, a person wants to spend his days in peace and without the tension of money. But the real worry is how the monthly expenses will be met and how the flow of money will be maintained. For this reason, the choice of pension scheme becomes very important. Most working people face the big question whether they should choose NPS (National Pension System) or should they rely on UPS (Universal Pension Scheme/Traditional Pension).
The benefits and terms of both these schemes are different and the right option also changes according to the needs and salary structure of each person. That is, the answer to this question cannot be the same for all people. Rather, it would be right to take a decision only after comparing wisely.
Recently, Chartered Accountant (CA) Nitin Kaushik tweeted about this and told many important things. He said that the real difference lies in how many needs you will have after the age of 60 and how much arrangement you have made to fulfill them.
What is the difference between NPS and UPS?
There is a provision in the new system UPS that if someone has worked for at least 10 years, he will get a guaranteed pension. This means that a fixed amount will be received every month. On the other hand, NPS is linked to the market. The return in this is not fixed. It is necessary to invest about 40 percent of the money you will get at the time of retirement in annuity.
Annuity means that money is received every month in fixed installments from your deposited amount. Annuity usually gives 6 to 8 percent annual return. This means that here your pension will directly depend on the market movement and interest rates.
How much is your deposit?
Now the real question is how much money will you need after 60. Suppose your monthly expenses are 50 thousand rupees, then you will need about 6 lakh annually. If inflation increases, then expenses will also increase. This means that just choosing the name of the scheme is not enough, you also have to see whether such a big corpus will be created by the time of retirement or not. Corpus means the entire capital that you have accumulated and which will run your life ahead.
NPS can be a good option for young people who are between 20 and 40 years of age and can withstand the ups and downs of the market. By keeping the money invested for a long time, they will get the benefit of growth. But for those who are around 50 years of age and want to avoid risk, UPS is more comfortable. In this, a fixed pension is received every month and the worry about the future is reduced.
Ultimately, it doesn’t matter which scheme you choose. It matters what your needs are, what your lifestyle is like and how much risk you want to take. It is wise to choose according to your situation. Only then will your retirement life be spent with peace and stability.