Unit Linked pension plans or NPS: What to choose?

Parameters

ULPP

NPS

Cost

The investment management fee can go up to 1.35%. The charges on fund management, premium allocation, etc. are recurring.

The NPS is cheaper with no recurring charges. The investment management fee is capped at 0.25 per cent.

Minimum contribution

The minimum contribution for ULPP ranges between Rs 18,000 and Rs 24,000.The penalty for discontinuation is also Rs. 600 followed by a tedious procedure to close the account.

NPS requires a minimum contribution of Rs 6,000. The discontinuation cost is Rs. 100 after which the account gets closed.

Withdrawals

Does not allow withdrawals and buying annuity at term end is compulsory. After maturity, one third of the corpus can be withdrawn as lump sum while the remaining will go towards buying an annuity scheme.

Does not allow withdrawals and buying annuity at term end is compulsory. Only allows for withdrawal of up to 20 per cent of the corpus before turning 60 and the rest has to be invested in an annuity scheme.

Taxation

Annual premiums for ULPPs qualify for a tax deduction under Section 80C of the Income Tax Act. On maturity, the one-third withdrawn is also tax-free.

It is an EET (exempt-exempt-tax) investment, meaning the contributions are tax-free. The amount withdrawn at the time of maturity is taxed.