Comparison between Insurance linked Plan, New Pension Plan, EPF and PPF

The Government has now opened up its New Pension scheme to all between the ages of 18 and 55. It promises returns of over 14 per cent and offers the lowest fund management charges in the world. This is particularly relevant if you are employed with a private firm and have no existing pension benefits.

This one is different from the existing pension schemes available with insurance companies.

Rather it’s similar to the pension scheme for central government employees, which yielded an average return of 14.5 per cent in 2008-09.

There are some other things that make the scheme viable.

The charges are extremely low at .0009 per cent. This is the lowest in the world compared to the 2 per cent charges for existing unit linked schemes. The scheme is managed by the Pension Fund Regulatory and Development Authority (PFRDA) which certainly lends a sense of security in these troubled times.

Anyone between 18 to 55 can start investing even with 500 rupee as first installment. The minimum annual premium however must total to Rs 6,000.

Once invested, the person gets a Permanent Retirement Account Number or PRAN which can be accessed from anywhere.

Fund managers selected by the regulator will manage your funds.

Risk will have to be decided by the investor. However, an auto choice option profiles the investors risk appetite based on age. So a younger person will have more exposure to equity markets than someone who is 55 years old.

For this scheme to be a success, a lot will depend on the performance of private fund managers.

Beside tax benefit, safety, higher returns and flexibility are the things that make this scheme attractive during your winter days.