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NPS Tier 1 and Tier 2 plans have a corporate scheme (C) which has a mandate to invest in bonds issued by public sector undertakings (PSUs), public financial institutions (PFIs), infrastructure bonds, private corporate bonds and bank deposits.

This is like a short-term diversified debt fund with about 50% of a banking and PSU fund and 50% of a corporate bond fund. However, the credit quality is typically much higher.

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A look at how NPS Tier 1 Equity schemes (E) have performed. With the increase in popularity of NPS because of the clever introduction of additional tax saving benefits - which one should avoid, more and more people are searching for "best NPS pension fund manager".

The reality is that there is nothing much to choose between the seven pension fund managers - ICICI, UTI, HDFC, Kotak, Reliance, SBI, LIC. Value Research has started maintaining returns of NPS Schemes and quick will validate the above comment.

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My mother retired 13 years ago and started receiving a pension that was indexed to inflation. Not only did it increase twice a year, thanks to DA hikes, it also increased as a result of pay commissions. The average year on year growth of her pension is close to 13%. This is an astounding number - not for her, but for the government who has to pay a similar pension to the lakhs of central and state government pensioners.

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The national pension system (NPS) is likely to be remodelled significantly over the next few years. This is a gradual transition from what is known as a directed investment regime to a prudent investor regime (PIR).

The first phase of the prudent investor regime as recommended by the Bajpai committee is about to be implemented. The Bajpai committee submitted its report on the "Investment Pattern for Insurance and Pension Sector" in May 2012.

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Here is a guide to investing in the National Pension System (NPS) with suggestions for existing and potential individual, corporate and government subscribers.

Over the past few years, the government has tried hard to make the National Pension System popular. First, it used the magic phrase tax-saving by allowing an additional 50,000 invested in Tier 1 to be discounted from taxable income.

Next, it used the magic phrase tax-free by allowing 40% of the corpus accumulated at retirement to be withdrawn free of tax. As we all know, it tried and failed to implement the same rule with the EPF. Sooner or later the EPF is bound to become marked to market and taxable like the NPS.

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