The additional Rs 50,000 tax deduction for investments in the NPS proposed in this year’s Budget is just one of the many benefits that the scheme offers to investors,tellsThe additional deduction under Section 80CCD will induce investors in a big way. I am convinced that 2015 will be the year of the NPS. But the new tax benefit is not the only reason why one should invest in NPS. It offers many other positives. It is perhaps the lowest cost pension scheme in the world. The total recurring expenses inclusive of the fund management fee and all other handling and administrative charges works out to between 0.05% and 0.21% per annum. It is completely portable and can be operated from anywhere in the country. It also offers flexibility in terms of choice of pension fund manager and investment mix.I agree to some extent. The NPS is currently under the EET regime of taxation. However, we understand that under the direct taxes code, NPS is proposed to be under EEE regime. Also, tax rules tend to change and no one can anticipate what will be the regulation 20-25 years down the line. So this should not deter one from investing in NPS.Please note that the retirement corpus at the time of maturity is not fully taxable. Up to 40% used for buying an annuity will not be taxed. Only the amount withdrawn as lump sum will be taxable. Investors who are worried about taxation on maturity should invest only that in the NPS which can create the corpus needed to be put in an annuity.I come from a different school of thought. These features are not problems. In fact, they are the positive aspects of the NPS. The cap of 50% equity exposure in NPS protects subscribers from the vagaries of the market. Even if you take a long-term perspective, it has been historically seen that at least onethird of the people get struck in a bad cycle of the market during their superannuation period. So the cap of 50% on equity is worth retaining. I believe that retirement planning is sacrosanct and should not be fully exposed to the huge risks associated with the equity markets. The financial literacy in India is also not high enough to protect investors from reasonable risk.Under NPS, investors already have the choice of investment mix under active choice option. They can also alter their investment mix once a year. For those who are not mature enough or do not want to choose an investment mix on their own, NPS has an inbuilt ‘Life Cycle Fund’. But I agree that Indian investors at large are not mature enough to make the right choices.The lack of liquidity is also a positive point of the NPS. The Employees’ Provident Fund is a live example of how most people are left with a very meagre amount at the time of retirement. This is generally due to liquidity in the system. In many cases, the retirement fund retires before the person.The main objective of the NPS is to provide ‘regular source of income after retirement’.This purpose would be defeated if the corpus does not generate monthly pension. At present the annuity market is not very developed in India. NPS would pave the way for developing the annuity market and the annuity rates are likely to improve in future to benefit the pension seeker.I don’t agree that the Budget has given an unfair advantage to the NPS. Such an incentive was needed and will turn the scheme in the ‘pull sales mode’.EPFO subscribers have been given a choice to choose between the Provident Fund and the NPS. This is a welcome move. The well informed investors may make a suitable choice based on their requirements.It is unfair to compare the NPS with the Provident Fund. The NPS is a market-linked product with just 5-6 years of track record whereas the Provident Fund is a guaranteed returns scheme. However, given the growth potential of the Indian economy, it is advisable to associate with a product where there is some equity component. Therefore, the NPS fits far better than the Provident Fund where there is no equity exposure. The returns from the NPS are likely to be far better than those of the Provident Fund.Prospective investors should open an NPS account as soon as possible. While choosing a pension fund manager, they should look at the following aspects: consistency of returns, credit profile of the debt portfolio, risk adjusted returns of the funds and the pension fund manager’s track record.Asset allocation is the function of the risk appetite of the investor. However, my suggestion is that if you are below 50, keep the allocation to equity at 50% and the rest in corporate bonds and gilts. After you turn 50, gradually bring down the equity component so that you have 20% in stocks when you are 55. After that, the allocation to equities can be kept at 20% till maturity.