NPS Scheme: Know Tier-II account of NPS, why it is called a hidden treasure? nps tier two account is a hidden james why
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What is ‘Tier-II’ account
Similar to the Tier-I account of NPS, there is also a ‘Tier-II’ account. Subscribers who have an existing NPS account can visit the website of National Pension System Trust (NPS Trust) to open their ‘Tier-II’ account. On one hand, today’s modern youth have many ‘e-wallets’ where they keep their deposits for the use of many services and on the other hand, there is also the older generation, whose money is lying in a savings account. The truth is that both these generations can really benefit from a ‘Tier-II’ account of NPS.
How is investment
Investment in ‘Tier II’ account can be made through all payment channels (except credit cards). And this has nothing to do with ‘Tier I’ contributions. You can also set up a SIP when you open a ‘Tier-II’ account with the channel partners of NPS. In addition, the NPS ‘Tier-II’ account offers good flexibility in terms of withdrawal with nominal fees charged for withdrawal. Here the common requirement for both the generations is that they should be able to access their funds without any lock-in period or under the shadow of stringent regulations.
where will your money be invested
In view of the short term investment option provided under ‘Tier II’, individuals are allowed to take the risk and invest up to 100% of the assets under the equity option. In this, they can opt for three options i.e. Equity, Corporate Debt and Government Securities. Or they also have the option of choosing a combination of these options with a greater equity proportion which is almost similar to a large cap ‘hybrid fund’. On an average, the equity scheme benchmark returns have been seen around 8.35% for one year.
Why NPS Scheme-E (Tier-II) is better
The amount kept in ‘Tier-II’ account can avail investment benefits as compared to keeping money in e-wallets or savings accounts. ‘Tier-II’ has the potential to help customers maximize returns on their funds besides providing benefits to those who understand risk profiling and asset management. Even those with limited or no knowledge of risk and asset management can always opt for the ‘Auto Choice’ option to take advantage of this.
No lock in period on withdrawal
In short, we can say that an NPS ‘Tier-II’ account is:-
1. Smart way to save for your short term goals
2. Asset class may be different from ‘Tier-I’
3. No lock in period on withdrawal
4. No minimum balance required
5. Can convert the fund to ‘Tier-I’ at any time
It is suggested here that NPS ‘Tier-II’ should be used as a complementary product to ‘Mutual Fund’ investments.
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