In the budget of 2009, government of India has introduced NPS or National Pension Scheme. This scheme is available in certain banks and post offices throughout the country. It lets you invest your money in equity, debt and government securities. You can invest your money in accordance with your risk appetite. The investment will be managed by fund managers, who will charge a nominal fee for the same.

You can withdraw your money in the form of pension once you reach the age of 60. You can claim tax benefits on the sum invested. The minimum amount you can invest is Rs. 500 per month. Once you reach the age of 60, you can withdraw 40% of the sum invested to buy annuity though a life insurance company to get your monthly income.

However there are 2 drawbacks to this scheme. For one, while investment helps you save tax, you will end up paying tax on the returns at the time of withdrawals. This will reduce your returns and is an important factor during your retirement when you don’t have any source of income. Also the charges for managing the fund are quite high. For opening an account you pay Rs. 50, Rs. 350 for annual maintenance charge, Rs 10 for each transaction and   0.0009% per year of the fund value as the fund management charges. So effectively you pay more than Rs 500 towards the charges. This is quite expensive.

Hence it would be advisable to avoid NPS. Instead stick to mutual funds that have managed to offer consistent returns. As you near retirement, withdraw your investment and invest it in a bank fd. You’ll save on taxes as well as charges.

Many people find company deposits lucrative due to the higher rate they pay on the FDs as compared to bank FDs. However this high return also comes with high risk. The major risk in case of a company FD is that if the company is unable to repay your money, you end up losing it. But in case of banks, your money is safe as the bank FDs are insured up to Rs. 1 lakh. So in case the bank becomes insolvent, you are sure to get your money back.

So how do you protect yourself when investing in company FDs? For one, opt for bank FDs having a credit rating of at least A+. These ratings are given by rating agencies like ICRA and CRISIL. A+ ratings implies the FD is safe.

Find out the company’s record in making repayment on time. Check the company promoters’ record. E.g. it is always better to opt for FDs from companies like Tata and L&T. Stay away from companies with unknown promoters, even though they may be offering higher rate of interest.

Follow these tips to ensure your money in company FD is safe.