Wealth advisor Chandralekha MR says India’s National Pension Scheme (NPS) has become an even more powerful way to build wealth, potentially outperforming mutual funds.
Recent upgrades have made it especially appealing for young earners who want to maximise long-term growth while keeping costs low.
Key Upgrades in NPS
Chandralekha highlighted four major enhancements that make NPS more attractive:
100% Equity Option:
Earlier, equity exposure was capped at 75% depending on age and scheme.
Now, investors can allocate all of their portfolio to equities, allowing young investors to benefit from early compounding and tax advantages.
Reduced Lock-In Period:
The mandatory lock-in was previously tied to retirement age.
It has now been reduced to just 15 years, making NPS suitable for medium-term goals like buying a home, higher education, or mid-career sabbaticals.
Multi-Scheme Flexibility:
Investors can now mix aggressive, balanced, or conservative options within the same account, creating a diversified portfolio without opening multiple accounts.
Low Costs:
Even with management fees rising from 0.09% to 0.30%, NPS remains much cheaper than most mutual funds, which charge 1–2%, or even direct mutual fund plans that charge 0.5–1%.
Over decades, this low-cost advantage can compound into significant savings.
Future Changes Could Make NPS Even Better
Chandralekha mentioned two proposed changes that could further boost NPS:
Reduced Compulsory Annuity Allocation: From 40% to 20%, giving investors more control over their corpus.
Extended Maximum Investment Age: From 75 to 85, allowing senior investors to benefit from longer compounding.
Why Investors Should Care
With these upgrades, NPS is no longer just a rigid retirement product.
It has become a flexible, cost-efficient tool for wealth creation.
Chandralekha emphasizes that if used correctly, NPS could potentially deliver better long-term returns than most mutual funds.
