UPS to NPS: Opt for NPS if service tenure is long and volatility manageable
Published by Business Standard
Abhishek Kumar's role: Quoted
Abhishek Kumar said NPS can work for employees with 20 to 30 years of service ahead, noted that the government's extra contribution moves into the NPS corpus on exit, and pointed out that the switch swaps fixed payouts for market-linked ones.
What Abhishek Kumar said
Who could gain from switching from UPS to NPS?
In my view, NPS can make sense for employees with a long working life ahead, say 20 to 30 years, because market-linked investments have time to work over such a period. The longer the horizon, the better the possibility of building a larger corpus, though returns from the market are never certain.
What happens to the government's extra contribution if I move to NPS?
When an employee exits UPS, the additional 4 per cent that the government contributes under UPS is credited to the NPS corpus. I see this extra amount as part of your retirement savings from then on; it moves with market returns over time and may add to the final corpus value, but it is market-linked like the rest of your NPS money.
What do I give up by switching from UPS to NPS?
The switch removes every payout that comes with certainty under UPS and puts market-linked returns in its place. I would make sure you are comfortable with that trade-off before deciding, because you swap a predictable pension for an outcome that depends on how markets perform.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on retirement
The article examines the one-time, irreversible option for central government employees to move from the Unified Pension Scheme to NPS. It weighs NPS's equity exposure and flexibility against the fixed pension, inflation-linked increases and family benefits given up, and outlines who may gain from switching and who should stay.
Publisher source
UPS to NPS: Opt for NPS if service tenure is long and volatility manageable