NPS vs PPF
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Updated date : 14 February 2020
National Pension System and Public Provident Fund (PPF) both have their specific benefits when it comes to the post retirement scenario. Both of these are long-term investment plans. With the underlying similarities between these two pension plans, there are distinct differences as well. An understanding of the same can help in making the final decision and determine which of the two seems ideal in your specific situation. Here below are some points of comparison between NPS and PPF.
Eligibility for the Schemes
Provident fund is is a long-term retirement plan, which is for any Indian resident, excepting the NRIs. The National Pension System does not have any such demarcations. It is open for every Indian including the NRIs. Anyone who belongs to the age group of 18-60 is eligible for NPS.
Minimum and Maximum Investment Amounts
When it comes to the amounts to be invested, both National Pension System and Public Provident Fund have similar lower brackets, which is INR 6,000 payable within 4-12 times in a year with a minimum contribution of INR 500. However, the upper brackets for both the schemes vary. For PPF, the maximum bracket is INR 100,000. There is no such upper limit for NPS, but it is possible to get tax benefits under various sections for up to INR 100,000 in NPS provided the contribution amounts are within the 10% bracket of your total salary.
Return of Investment
One of the main reasons why people go for pension funds in India is because of the associated returns. When compared between the National Pension System and Public Provident Fund, NPS is the higher return vehicle for a portion of what you invest goes towards equity trading which signifies higher returns. PPF on the other hand is all about fixed returns and there is no scope for added frills.
For the given period PPF has fixed returns on all counts and any changes are notified in advance. How much you are going to get back through NPS however depends upon fund manager performance and combination of asset class. If you are after short term, returns in case of NPS this can be volatile. Therefore, there is more emphasis on long-term returns since you have the option of using 50% of the amounts of equity trading through the National Pension System. Only 50% contributions make this a safer bet compared to mutual funds. When it comes to returns, NPS seems a better choice than PPF.
In any retirement portfolio whether it is National Pension System and Public Provident Fund both have their own place and associated benefits. PPF is all about the safety cushion regarding your investments with solid returns. On the other hand, there is a dual benefit associated with NPS, which includes both capital safety and appreciation of investments. No wonder there is a higher interest regarding the National Pension System especially in view of the recommended amendments in the system, which the government is going to implement in the coming times.
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