look news india
If you are starting a job in the private sector where you get a basic salary of Rs 14,000 and 10% annual increment, you can get a monthly pension by making consistent contributions to the Employees Provident Fund (EPF) and National Pension System (NPS). You can get Rs 2.9 lakh in this form. This amount will be much higher than your last basic salary of Rs 2.44 lakh after 30 years of service.
NPS is best for private sector employees
Government employees invest 10% of their salary in NPS. At the same time, the central government and state governments contribute 14% from their side but due to various controls imposed by the government, they do not get much return on investment. For example, the maximum investment in equity in NPS for government employees is limited to 15%. For government employees, up to 95% of NPS assets can be invested in infrastructure/debt funds and 5-15% in equity. Therefore, the total compensation under this government scheme is very low.
At the same time, private sector employees who have opted for 10% contribution to NPS by their employer as part of salary enjoy more flexibility. They can invest up to 75 per cent in equities. Since equities are known to give high returns in the long run, private sector employees can raise a large corpus. Private sector employees can now choose to invest 14% of their basic salary in NPS and get income tax deduction for it. Higher contributions can help them build a larger retirement fund.
You can also get a guaranteed pension
The biggest attraction of a government pension scheme is the assurance of getting 50% of the last drawn basic salary as a guaranteed pension. For private sector employees, earning a good amount on a regular basis is not a very difficult goal.
For example, 24% of the basic salary goes towards EPS, employer's EPF contribution and employee's EPF contribution. Under the old tax regime, employers could contribute 10% of the basic salary to NPS. This is eligible for deduction under section 80CCD(2). Additionally, the deduction limit under the new tax regime has been increased to 14% of the basic salary, which will help employees build a larger NPS corpus. If you make these contributions consistently throughout your service period, you can get more than 50% of your final salary as pension.
