National Pension System (NPS) vs Public Provident Fund (PPF) vs vs LIC Jeevan Shanti Plan: Retirement schemes compared

Retirement planning is important for everyone. And the earlier one starts, the better it becomes in terms of financial returns. Some of the prominent government-backed schemes that always come into calculation while making retirement planning include the Public Provident Fund (PPF) and the National Pension System (NPS). LIC Jeevan Shanti is the latest retirement plan offered by India's largest insurer Life Insurance Corporation (LIC). All the three schemes are different from each other and come with distinct monetary and tax benefits. 

Here is a comparison of the three schemes in terms of eligibility, tax relief, the rate of interest and expected returns: 

Eligibility: Any resident Indian can open a PPF account. This can also be opened in the name of minor children. NPS can be opened only by an Indian citizen aged 18-65 years. Any Indian Citizen, resident or non-resident, between the age of 60- 65 years, can also join NPS and continue to invest up to the age of 70 years in NPS.

Minimum entry age for LIC Jeevan Shanti scheme is 30 years (completed)

Maturity: PPF account matures in 15 years. It can be extended after 15 years by a block of five years. No maturity tenure is there for NPS. One can contribute till the age of 70 years. LIC Jeevan Shanti is a single premium plan wherein the Policyholder has an option to choose an Immediate or Deferred annuity. The annuity rates are guaranteed at the inception of the policy for both Immediate and Deferred Annuity and annuities are payable throughout the lifetime of Annuitant(s).

Investment limit: In PPF, minimum investment limit is Rs 500, while the maximum amount if Rs 1.5 lakh per annum. In NPS, the minimum amount is Rs 6000 per annum, and the maximum amount should not be more than 10 per cent of the person's salary or the gross income. There is no maximum limit on investment in LIC Jeevan Shanti scheme. 

Tax benefit: 

PPF - Investment, maturity amount and returns are not taxed. 

NPS: Contribution and growth in corpus not taxed, lumpsum withdrawn is partially taxed. Income Tax Return benefit can be claimed only on Rs 1.5 lakh/per annum under Section 80 CCD(1) and an aditional Rs 50,000 under Section 80CCD (2). 

For a person with taxable income, Jeevan Shanti allows one to defer additional tax liability through the deferred annuity option.

Returns/Interest rate

PPF is currently offering 8% interest rate. It is announced quarterly by the government. The returns on NPS investments are market-linked. Experts believe NPS has the potential to bring more returns to the subscriber because of it being market-linked. However, PPF comes with a guaranteed return promise. Hence, it remains one of the most popular investment instrument. 

Jeevan Shanti offers a minimum annuity of  Rs 1000/month.  A one-time investment of Rs 10 lakh at the age of 45 in this scheme, will result in an annuity of Rs 206,600 (over Rs 17,000 per month) after 20 years, according to LIC official plan document.

In the case of NPS, one has to purchase an annuity for at least 40 per cent of the accumulated wealth at maturity. When the maturity amount is less than Rs 2 lakh, one can make a complete withdrawal. In case of PPF, there is no need to buy an annuity. 

NPS is purely a retirement saving scheme and financial planners' favorite. Unlike PPF, NPS can't be used for other purposes like children's education, daughter's education etc. 

Jeevan Shanti is purely an annuity scheme.