National Pension System (NPS) scheme was launched in January 2004 only for government employees. In 2009, it got open for all i.e. private sector employees and other individuals. Therefore, today NPS is a good option to create retirement corpus. 

The scheme allows subscribers to contribute regularly in a pension account during their working life. On maturity, subscribers can withdraw 60% of the corpus in a lump sum. But the remaining 40% of corpus should be use to buy an annuity plan from an insurance company to get regular pensions.  

List of Fund Managers                                           

 The Pension Fund Regulatory and Development Authority (PFRDA) has designated the following eight Fund Managers to manage the NPS corpus. 

NPS accounts of government employee’s are managed by LIC Pension Fund, SBI Pension Fund and UTI Retirement Solutions Fund. While other individuals can select any one of the fund managers from the following eight funds:

1. Birla Sun Life Pension Scheme
2. HDFC Pension Fund
3. ICICI Prudential Pension Fund
4. Kotak Pension Fund
5. LIC Pension Fund
6. Reliance Capital Pension Fund
7. SBI Pension Fund
8. UTI Retirement Solutions   

PFRDA allows NPS contributions to be invested in three asset classes namely equities, corporate bonds and government bonds. As a result, it helps to build a decent amount over long term.

There are two types of options available for subscribers in NPS to create their portfolio:  

1.Active choice in which subscriber decides their fund allocation and percentage over different asset classes. (Maximum allocation to equity can be 75%).    
2. Auto choice, Under this option, asset allocation is done automatically as the per age of subscriber.

Tax benefits: 

Importantly, contributions to NPS are eligible for tax exemption under 80-C section up-to limit of Rs 1.50 lakhs. In addition, NPS offers further deduction of Rs. 50,000 is allowed under section 80-CCD .

Advantages:

1) Fund Management charges are low which does not affect returns.

2) NPS helps to build a sound retirement kitty as it invests in equity market.

3) It offers tax deduction u/s 80 C in addition to 80 CCD.

4) Amount i.e. 60% of corpus withdrawal on retirement is completely tax free. In other words, you do not get taxed at the time of withdrawal at retirement.

5) It offers flexibility in allocation to different asset classes as per investors risk appetite. 

Disadvantages:

There are many advantages of NPS. On the other hand there are few disadvantages also like:

1)NPS is not actually a tax efficient option. The annuity you will receive will be taxable as per your tax slab.

2) There is no transparency about how your money going to get invested in equity market, what is the investment strategy of fund manager etc.

3) Hard to exit or poor exit options.

4) NPS has low liquidity due to long lock-in period.

5) Complex product to understand.

NPS is a good product as long as you are ready to take bit of high risk and can invest for long term.