ASK OUR PLANNERRs.36 lakh in hand now would
make more sense; else,
consider to use the money to
buy the house.
Q. My age is 26 years and I have an
additional surplus of Rs. 1,00,000,
current income Rs. 4,00,000 p.a. and
personal expense comes up to Rs.
1 ,30,000 p.a. as I am living with my
family. Thinking of retirement,
should I select a pension plan or
increase my EPF? How should I
invest in a pension plan? Please
elaborate.
- Sunitha Chaudhury
A. As you have an investment
horizon of at least 20 years for
your retirement, it makes sense
to be aggressive in your
approach and invest majorly in
Equity, with some portion in
Fixed Income (Debt). Traditional
pension plans predominantly
invest in Fixed Income
instruments. Unit Linked
Pension Plans invest your
money in a mix of Equity &
Fixed Income, the allocation of
which you can decide yourself
or leave it to the fund. NPS is a
good retirement savings
vehicle that acts as a mutual
fund and provides you the
option to invest in a mix of asset
classes, with secondary benefit
of tax deductions. However,
you face liquidity issues with
the pension products as there
are restrictions for withdrawals
before retirement: NPS
withdrawals are allowed in case
of extenuating circumstances
(medical needs / children
education etc) up to 25% of
corpus; Pension plans give you
far less surrender value
compared to the amount you
had invested, entire amount
being taxable.EPF currently provides the
highest post-tax return from a
debt oriented investment. Apart
from the mandatory 12%
deduction, you can also invest
additional amount through
Voluntary Provident Fund (VPF).
Here again you face liquidity
issues – somewhat relaxed than
above options - entire
withdrawal is possible only if
you are no more employed;
partial withdrawal possible
upto a certain limit in case of
extenuating circumstances.We suggest investing in open
ended mutual funds following