A Guide for Gen Z to Secure their Financial Future with National Pension Schemes

24^th Jun 2025...

Saving money can feel tough when spending is so easy—whether it’s online shopping, dining out or booking trips. For Gen Z, the challenge is clear: enjoy life now but still plan for a secure future. That’s where the National Pension Scheme (NPS) comes in. It’s simple and flexible, helping you save for tomorrow without giving up today’s fun. Let’s see how NPS can make financial planning easier for you.

Benefits of NPS for Gen Z

Here’s why NPS is a great choice for Gen Z:

Diversification is possible

NPS doesn’t rely on a single investment option. Your money gets invested in different asset classes like equity, corporate bonds and government securities, which reduces risks and improves long-term returns. For those just starting out, it’s an easy way to balance safety and growth. Plus, you can choose between active management (you pick the ratio) or auto-choice (NPS does it for you) based on your comfort level.

Tax benefits

Who doesn’t love saving on taxes? With NPS, you can enjoy tax deductions of up to ₹2 lakhs annually under sections 80CCD(1), 80CCD(1B) and 80CCD(2) of the Income Tax Act. Here’s the breakdown:

₹1.5 lakh under section 80C (part of the standard limit).
An extra ₹50,000 under section 80CCD(1B), exclusive to NPS.

So, not only does NPS secure your future, but it also saves you money today.

Develops habit of regular savings

Starting small and staying consistent is key to long-term financial success. With NPS, you contribute regularly, creating a habit of disciplined savings. For Gen Z, this means setting aside money without stress, knowing it’s working for your future. Whether you’re earning part-time or full-time, NPS makes saving a seamless part of your routine.

The minimum contribution is affordable

With NPS, you don’t need a lot of money to start saving. For the primary account, you can begin with as little as ₹500 and ensure you contribute at least ₹1,000 every year. If you want an additional savings option, you can invest in a flexible account where the minimum transaction amount is just ₹250. This makes NPS simple and budget-friendly, even for students or young professionals starting out.

How to utilise NPS: Key steps to take for Gen Z

Getting started with the National Pension Scheme (NPS) is easier than you think. Here’s a step-by-step guide to open your account and make the most of NPS:

How to Open an NPS Account
1. Choose where to open the account: You can open an NPS account online through the eNPS portal or offline at banks or post offices.
2. Get your documents ready: You’ll need your PAN card, Aadhaar number and a valid mobile number.
3. Make your first contribution: The minimum amount for a Tier I account is ₹500.

Set up your PRAN: After registration, you’ll receive a Permanent Retirement Account Number (PRAN). It helps track your account.

For Gen Z, the online process is quick and simple—no long paperwork, just a few clicks.

Investment options in NPS

NPS gives you four investment options to help grow your money. Here’s how each works:

Equity

Equity investments put your money into stocks of listed companies. This option has the highest growth potential because stocks can give great returns over time. While equity comes with market ups and downs, it’s ideal for Gen Z investors who have time on their side to recover from short-term risks. If you’re looking for long-term wealth creation, equity can be a smart choice.

Corporate debt

With corporate debt, your money is invested in bonds issued by companies. This option offers a good balance between risk and reward, giving you steady returns without being as volatile as equity. It’s perfect if you want safer growth for your money while still earning more than a traditional savings option.

Government securities

Government securities invest your money in bonds issued by the government. This is the safest option in NPS, with very low risk and predictable, steady returns. It’s great for those who prioritise stability over high growth and want to avoid market fluctuations.

Alternative investment funds

This option invests your money in real estate, private equity or infrastructure projects. Alternative investments are for those looking to diversify beyond the usual options. While they carry higher risks, they can also offer unique growth opportunities over time.

Pick the right mix

NPS gives you two choices to manage your investments:

Auto choice: NPS decides the asset mix for you based on your age. Perfect if you’re unsure where to start.
Active choice: You decide how much to invest in each option (Equity, Debt, etc.). Ideal if you like control over your money.

Wrapping up

The National Pension Scheme (NPS) is a smart and affordable way for Gen Z to secure their financial future. It offers the flexibility to invest according to your goals. Starting early with small contributions can go a long way. Leverage your Kotak811 Savings Account to seamlessly make contributions to NPS. It’s quick, simple and a step closer to building your financial security!

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.