Park surplus funds in NPS Tier 2 for higher returns

FLEXIBILITY IN ASSET ALLOCATION HELPS BUILD A PORTFOLIO BASED ON RISKAPPETITE

- SAIKAT NEOGI

INDIVIDUALS LOOKING FOR higher returns than fixed deposits can park money in National Pension System (NPS) Tier 2 account as it is linked to market instruments.

Unlike Tier 1,ithas no lock-in period, which makes it a flexible option for shortand medium-term needs.

The NPS Tier 2 account is a voluntary savings account under NPS, where one can invest and withdraw anytime without restrictions. One needs tohaveaTier 1 account to have aTier 2 account.

Over a three-year period, the equity returns of 10 pension funds in NPS Tier 2 range between 14.6% to 18%, For government securities the returns are 6.2% to 6.6%.And forcorporate debt, between 8.3% to 8.8%, higher than SBI's fixed deposit rate of 6.45% for two to less than three-year tenures.