u/B0B_jr

NPS seems like a bad deal for disciplined long-term investors, and I'm trying to understand what I'm missing.

Let's assume I invest ₹10,000 per month for 20 years and end up with a corpus of ₹1 crore.

With NPS:

• I can withdraw only 60% (₹60 lakh).
• The remaining ₹40 lakh must be used to buy an annuity.
• Even if I get an 8% annuity (which is among the better options), that's only about ₹3.2 lakh per year, and the principal is effectively locked away.

Now compare that with investing in equity mutual funds:

• Total amount invested = ₹24 lakh.
• Corpus = ₹1 crore.
• Capital gains = ₹76 lakh.
• LTCG tax is roughly ₹10 lakh (assuming I redeem the entire amount at once).
• I still get around ₹90 lakh in hand.

Even if I set aside ₹30 lakh (the difference between the ₹40 lakh annuity requirement and the LTCG tax) and put it in an FD at 7%, I retain ownership of my money and have complete liquidity.

Ignoring the flexibility of mutual funds (which is another huge advantage), I don't understand why NPS is considered attractive for someone who is financially disciplined. The tax benefits are nice, but NPS generally offers lower returns than long-term equity investing.

Is the main advantage of NPS simply that it forces people to save and prevents them from spending their retirement corpus? What am I missing?

For someone who is financially disciplined and comfortable managing their own retirement portfolio, does NPS actually make sense beyond the tax deduction? Or is it primarily a behavioural tool designed to guarantee that people don't outlive their retirement savings?