/Should I put my superannuation fund in LIC or NPS to get better returns?

Should I put my superannuation fund in LIC or NPS to get better returns?

I have been contributing to a superannuation fund for the past 34 years. I am going to retire in March 2021 at the age of 58. We have two options, either to put the superannuation fund in LIC and get monthly pension at the rate of 5.25% per annum or to put the money in the NPS. Which option will give me better returns? I don’t have an NPS account.

Prableen Bajpai, Founder FinFix® Research & Analytics replies, “Instead of superannuation fund in LIC which only offers a pre-tax pension at 5.25%, you can consider shifting to NPS. You need to have an active NPS Tier-1 account. This can be done through your employer (where NPS is implemented). Alternatively, you can do it through a PoP or the eNPS portal. You can log in to npstrust.org.in to open an NPS account. To initiate the transfer, a request for transfer will have to be made to the recognised EPF, through your current employer. This requests the transfer of EPF balance to your NPS account. Under NPS, if you retire at 58 years, then at least 80% of the money needs to be utilised for purchase of an annuity providing for the monthly pension and the balance is paid as a lump sum. However, once you turn 60, 40% of the accumulated corpus has to be utilised for purchase of an annuity and the balance is paid as a lump sum to the subscriber. Away from these options (if you have a choice), you can even withdraw the accumulated corpus, and then invest across different government schemes (Senior Citizen’s Saving Scheme, Pradhan Mantri Vaya Vandana Yojana, RBI Floating Interest Bonds) and ultra-short duration debt funds to generate a monthly income.”

For my granddaughter’s first birthday, I invested Rs 1.5 lakh in six mutual funds. I invested Rs 25,000 each in Aditya Birla Digital India, HDFC Hybrid Equity, Kotak Standard Multicap, L&T Large Cap, Mirae Asset India Equity and Nippon India Large Cap Fund. Were these good choices? My son has started SIPs of Rs 2,000 each in SBI Small & Midcap Fund and Nippon India Small Cap Fund.

Rushabh Desai, AMFI registered mutual fund distributor replies, “Your goal is a bit unclear. You have three large-cap, two small-cap, one multi-cap, one aggressive hybrid and one IT sectoral funds. In the large-cap segment, the returns of L&T India and Nippon India have not been good. Also, you don’t require three funds in this category. You can redeem them after the exit load period if your returns are positive and shift the corpus to Mirae Asset Large Cap Fund. The rest of the funds are consistent performers and you can continue to hold them. As you are a retired person I would like to draw your attention to the sectoral and the small-cap funds in your portfolio. Even though these funds are of good quality, they are very risky, volatile and cyclical in nature. There have been many years at a stretch the small-cap and sectoral segments have delivered either negative or no returns which might not suit your risk temperament. They require a minimum investment horizon of 6 to 7 years.”

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