Structure

NPS begins with a mandatory Tier I account and an annual contribution of at least Rs 6,000. A Tier II account, which would offer a withdrawal facility, is expected to be launched in another six months. You can invest in NPS in two ways.

Active choice: You can allocate your funds across three fund options: equity (E), in which a maximum of 50 per cent of the portfolio is allowed; fixed income instruments other than government securities (C); and government securities (G).

Auto choice: Under this, your funds automatically begin with a maximum equity exposure of 50 per cent till the age of 35 years, which tapers off to 10 per cent by age 55. This gives stability to your investment as you near the maturity line.

You can choose from the six designated pension fund managers (see 10 Common Questions Answered). Says Kartik Varma, financial planner and co-founder, iTrust Financial Advisors: "With time, fund performance could be a yardstick, but it is unlikely that fund performance would vary hugely since the funds would be invested in similar products."

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