‘NPS is a product for the unorganised sector’ | business | Hindustan Times
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‘NPS is a product for the unorganised sector’

business Updated: Aug 30, 2010 00:31 IST

Mint, Hindustan Times and NDTV, bring you a personal finance show, Let’s Talk Money. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, senior anchor, NDTV, aims to answer viewers’ questions about money-related issues. Here are edited excerpts from the show that aired over the weekend on NDTV Profit and NDTV.

Natarajan: The one big question which has popped up in many of your emails is what is NPS, or the New Pension Scehme. We’ll kick off this show with a small discussion around it. Any individual between the ages of 18 and 60 can invest in NPS and get pension benefits. There are seven funds under the NPS — SBI Pension Funds, UTI Retirement Solutions, LIC Pension Fund Ltd, IDFC Pension Fund Management, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund and ICICI Prudential Pension Funds Management Co Ltd. Each will offer you a 3 options of simple, standard schemes with different equity exposure — scheme A invest mainly in government bonds, scheme B invest mainly in corporate bonds and partly in equity and government bonds, scheme C invest up to 50 per cent in equity and partly in government and corporate bonds. In the first year of its operation, the scheme is giving 10-12 per cent returns, depending on the plan chosen. The biggest attraction of the scheme is the low fund management fee it charges — 0.009 per cent against 2.25 per cent charged by MFs. It charges a fixed annual account maintenance fee of R350 and an additional R20 per transaction.

Halan: By a factor of 10 if the cost goes up, it’s still the cheapest product. It is a product for people in the unorganised sector, so for people who don’t have an office provident fund, that’s the only option. You have another reason why NPS makes sense now. After the direct tax code comes in, NPS becomes E-E-E, which means exempt-exempt-exempt (from tax at any point).

Ruchi Nayak, banker,Gurgaon: My father is 59 and my mother 53. They don’t have any past surgical record, but they do go for frequent sugar check-ups. Please suggest a mediclaim policy that would cover them till the maximum age and provide them cashless facility.

Halan: The advice is go for stand-alone medical covers. Your parents are not yet diabetic and if you buy this standalone medical cover, they so get cover for this disease. There are three companies in India which give stand-alone medical insurance — Max Bupa , Apollo Munich and Star Health. Both Apollo Munich and Max Bupa give you life-long health cover. Buy at least RS4 lakh individual policy each and then top that up with critical illness cover of RS5 lakh each.

Rahul Nair, 21, student from Mumbai: I have no source of income. I borrowed RS1.1 lakh@ 15 per cent per annum from my dad. I have started investing in equity and mutual funds. I have invested RS10,000 in DSP BlackRock Focus 25. I have invested R95,000 in various stocks, but ended up losing around R8,000. Can you give advice me where to invest as well as help in recovering my losses?

Natarajan: You’re treating your dad’s hard-earned money as money to gamble with. However, you told us in your follow-up mails that you would like to become a a stock trader. It’s not a bad idea and people do make a living out of that. Get armed for that. Attend classes held by the BSE and NSE on stock market trading. There’s a basic course on analysing stocks; back it up with a course in technical charting — because daily trades are supported by technical charts very strongly — that’s an investment of Rs 30,000-40,000.