Choose NPS if you have long service tenure left and can handle volatility

The finance ministry has permitted a one-time, irreversible switch from the Unified Pension Scheme (UPS) to the National Pension System (NPS) for central government employees.

- HIMALI PATEL

This option can be exercised up to one year before superannuation or three months before the deemed retirement date in the case of voluntary retirement.

NPS: Growth and flexibility

NPS permits equity allocation of up to 75 per cent till the age of 50 under the Active Choice option. "Employees can possibly get better returns over 20-30 years in NPS," says Abhishek Kumar, Sebi-registered investment advisor and founder, Sahaj Money.com.

"Over time, compounding at even 10-11 per cent can create a substantially larger retirement corpus than in UPS," says Ajay Kumar Yadav, certified financial planner, chief executive officer and chief investment officer (CEO and CIO), Wise Finserv.

NPS offers a lot of flexibility, including four free switches per year, a choice of fund managers, and no exit load or capital gains tax when reallocating. Employees can pick between Auto Choice and Active Choice for asset allocation.