Are you looking for an early and financially-secure retirement? Now, you can retire much earlier, thanks to NPS (National Pension System) and MSF (Multiple Scheme Framework) investing.
As Indian Millennials or Gen Z, you might prioritise lifestyle flexibility and financial independence. The latest evolution of the NPS scheme directly supports this goal towards early retirement.
This long-term retirement tool doesn't require a wait until the age of 60 for all its benefits. Now, young professionals can view the NPS scheme as a main vehicle for their financial security.
What is the New and Normal Exit Rule
The early exit timeline can especially benefit the non-government subscribers. In the All-Citizen model, normal exit occurs at age 60 (or superannuation), where for a total corpus exceeding ₹12 lakh, subscribers can withdraw up to 80% as a lump sum (60% tax-free, additional 20% taxable).
Completion of 15 years may allow exit in specific schemes (subject to PFRDA approval), but this follows premature exit rules.
Mandatory Annuity - The remaining 20% of the corpus must purchase an annuity, acting as a safety net for later years with a steady income stream complementing the lump sum.
A Balanced Structure - This protects against outliving savings, offering immediate liquidity and long-term security in one account.
How to Use 100% Equity for 100% Growth
The introduction of MSF has given an opportunity for aggressive investors to opt for up to 100% equity exposure to maximise their growth potential.
The High-Risk Variant - This high-risk variant under the multiple scheme framework targets those with a long investment horizon. With the MSF, a subscriber can maintain a customised portfolio within a single Permanent Retirement Account Number (PRAN). You can choose from High, Moderate, and and (where offered) Low risk variants based on your personal risk appetite.
Compete With Other Market-Linked Products - With the Multiple Scheme Framework, the NPS scheme can remain competitive with other market-linked products like Mutual Funds. Professional fund managers manage these assets to optimise returns through equity-focussed strategies.
Be Your Own Portfolio Architect - The MSF empowers the individual to act as their own portfolio architect within the regulated boundaries of the system. With MSF, you can get a higher level of control for building a sturdy portfolio.
What is the Strategy of Retiring at 45 in India
Are you planning to begin your retirement journey at the age of 30? This could be the perfect "sweet spot" for those who aim to retire by 45.
15-Years Of Consistency - With 15 years of consistent contributions, the power of compounding works in your favour to help your portfolio gain strength.
The Equity Boost - The equity option under the “All Citizens” model can boost the final corpus value during the 15-years investment period.
Tax Efficiency - This is one of the core pillars of this strategy within the NPS scheme. An individual can save tax under Section 80C (old tax regime) for contributions up to ₹1.5 lakh in Tier 1. Also, an additional deduction of ₹50,000 for Tier 1 investments under Section 80CCD(1B) under the old tax regime can further enhance the total tax savings for the subscriber.
Post 60 Expenses Covered - At full NPS maturity after 60, the 20% mandatory annuity portion provides a baseline for lifelong expenses. The individual can aim for financial security throughout post-work life with NPS's lump-sum and annuity structure.
Low Fund Management Costs - More of the returns stay with the investor over 15 years. Thus, every rupee invested in the NPS scheme can work harder due to the transparent and regulated nature of the framework.
With institutions like Protean eGov Technologies, Investors can gain a seamless digital interface for tracking and managing these investments.
Conclusion
The combination of the 15-year rule and 100% equity exposure has created a powerful early retirement engine for the Indian workforce.
The NPS is no longer just a secondary tax-saving tool for the elderly. It stands as a sophisticated and flexible retirement vehicle for the ambitious youth. Early retirement becomes a reality when you use the NPS to its full potential today.
Frequently Asked Questions (FAQs)
Q1: Does the 15-year rule apply to Corporate NPS subscribers?
The 15-year rule applies to 'Normal Exit' for subscribers in the All-Citizen Model, while Corporate NPS follows vesting until retirement/superannuation. The NPS provides various exit options to suit different career paths and financial goals.
Q2: Can I switch between MSF schemes during the 15-year period?
Yes, investors can get greater flexibility with the multiple scheme framework. A subscriber can change investment choice or asset allocation (e.g., to common schemes) up to twice in a financial year, with free switches between MSF schemes allowed after 15 years or normal exit. This ensures that the NPS scheme remains aligned with your evolving risk appetite and market outlook.
Q3: What happens if my corpus is less than ₹8 lakh in 15 years?
Investors can make a full 100% lump sum withdrawal, if the total accumulated corpus is up to ₹8 lakh at the time of exit. Under current regulations, complete withdrawal is allowed if the corpus is up to ₹8 lakh at normal exit; for ₹8-12 lakh, up to ₹6 lakh lump sum is permitted with balance via SUR or annuity.
Q4: Can I continue investing after I retire at 45?
Yes. You can continue to contribute to the NPS until the age of 85. Even after a "Normal Exit" at 15 years (All-Citizen Model), you can maintain the existing corpus for tax-free growth. The multiple scheme framework continues to apply to all subsequent contributions made to the PRAN.
