Key Takeaways
- • Rahul Bhagat, CEO of DSP Pension Fund, says starting retirement investments 10 years earlier could nearly triple the final NPS corpus, even with only about ₹12 lakh of additional contributions, according to CNBC-TV18.
- • Illustrative projection: ₹10,000 per month at an assumed 10% annual return builds about ₹1.2 crore over 25 years versus about ₹3.4 crore over 35 years.
- • Annual fund charges matter: over 30 years at 10% gross returns, ₹10,000 monthly grows to about ₹2 crore at 0.1% annual charges versus about ₹1.7 crore at 1%, a gap of roughly ₹33 lakh.
- • At 6% assumed inflation, a household spending ₹50,000 per month today would need more than ₹2 lakh per month after 25 years to maintain purchasing power.
- • Non-government NPS subscribers must use at least 20% of the corpus to buy an annuity under the standard exit framework, with the remainder eligible for market-linked withdrawals under PFRDA's Retirement Income Scheme framework.
Summary
Rahul Bhagat, CEO of DSP Pension Fund, told CNBC-TV18 that starting retirement investments a decade earlier could nearly triple the final National Pension System (NPS) corpus, even if the additional contribution over that period totals only about ₹12 lakh. He illustrated the effect with a monthly investment of ₹10,000 assuming a 10% annual return: a 25-year horizon could build a corpus of roughly ₹1.2 crore, while extending the period to 35 years could increase it to approximately ₹3.4 crore. Bhagat attributed the gap to compounding, noting that the advantage of starting early comes not only from the extra money invested but also from returns having more time to compound in later years, when the accumulated corpus is larger. He cautioned that these figures are illustrative and not guaranteed.
Bhagat advised subscribers to raise contributions as income grows, noting that even a 5% annual step-up in monthly contributions can make a significant difference over a long horizon. He also stressed staying invested through market cycles, warning that interrupted contributions reduce the final corpus and that stopping investments during corrections risks missing a subsequent recovery.
On asset allocation, Bhagat said investors in their twenties and thirties can generally hold a higher equity share, gradually increasing debt exposure as retirement approaches. He identified the final five to 10 years before retirement as especially sensitive, since a sharp market fall at that stage leaves less time to recover before withdrawals begin. Lifecycle funds, which reduce equity exposure with age, can help manage this risk, though investors should check whether a fund's glide path fits their plans. He cautioned against abrupt portfolio shifts in response to headlines, noting that moving entirely into debt after a downturn could mean missing a recovery.
On costs, Bhagat said fund management charges are deducted over the investment period and can materially affect outcomes. He recommended comparing long-term returns after costs rather than judging pension funds on charges alone.
On retirement income, Bhagat said planning should account for future expenses: at 6% annual inflation, a household spending ₹50,000 per month today would need more than ₹2 lakh per month after 25 years to keep pace. For non-government NPS subscribers, the standard exit framework requires at least 20% of the corpus to buy an annuity, which provides lifetime income but fixed payouts that can lose purchasing power. Bhagat suggested combining an annuity for essential expenses with market-linked withdrawals from the remaining corpus, and pointed to PFRDA's Retirement Income Scheme framework, which provides periodic payouts while the remaining money stays invested. He noted that market-linked withdrawals are not guaranteed.
Bhagat advised subscribers to raise contributions as income grows, noting that even a 5% annual step-up in monthly contributions can make a significant difference over a long horizon. He also stressed staying invested through market cycles, warning that interrupted contributions reduce the final corpus and that stopping investments during corrections risks missing a subsequent recovery.
On asset allocation, Bhagat said investors in their twenties and thirties can generally hold a higher equity share, gradually increasing debt exposure as retirement approaches. He identified the final five to 10 years before retirement as especially sensitive, since a sharp market fall at that stage leaves less time to recover before withdrawals begin. Lifecycle funds, which reduce equity exposure with age, can help manage this risk, though investors should check whether a fund's glide path fits their plans. He cautioned against abrupt portfolio shifts in response to headlines, noting that moving entirely into debt after a downturn could mean missing a recovery.
On costs, Bhagat said fund management charges are deducted over the investment period and can materially affect outcomes. He recommended comparing long-term returns after costs rather than judging pension funds on charges alone.
On retirement income, Bhagat said planning should account for future expenses: at 6% annual inflation, a household spending ₹50,000 per month today would need more than ₹2 lakh per month after 25 years to keep pace. For non-government NPS subscribers, the standard exit framework requires at least 20% of the corpus to buy an annuity, which provides lifetime income but fixed payouts that can lose purchasing power. Bhagat suggested combining an annuity for essential expenses with market-linked withdrawals from the remaining corpus, and pointed to PFRDA's Retirement Income Scheme framework, which provides periodic payouts while the remaining money stays invested. He noted that market-linked withdrawals are not guaranteed.
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