Public Provident Fund vs National Pension System: Here's what you can get with Rs 100, Rs 200, Rs 417 a day!

PPF vs NPS: Public Provident Fund (PPF) and National Pension System (NPS) are two of the best and safest instruments for saving money for future use. While NPS is solely meant for pension post retirement purpose, PPF scheme can be used  for accumulating a big lump sum over a period of time. The lock-in period of a PPF account is 15 years. One can also use the PPF route for generating retirement money. Will PPF be a better option than NPS for pension? To answer this question, here we look at how Rs 100, Rs 200 or Rs 417 a day can grow in PPF and NPS accounts respectively over a period of 30 years. 

But first a few assumptions:

• You start saving at the age of 30 and continues till reaching the age of retirement at 60. 
• Second, the rate of interest in PPF remains 8% and the expected NPS rate of return is 8%.  

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Case-1: Rs 100 a day (= Rs 36500/year)

At the current rate of interest of 8% per annum, investing Rs 36,500 per year in PPF account will turn into approximately Rs 46 lakh over a period of 30 years. Remember that PPF account can be extended beyond 15 years in a block of five years each. By investing this money in schemes like LIC Jeevan Shanti Plan, one can get up to Rs 33,000/month for life. 

If you invest Rs 3000/month ( = Rs 100 per day), it will turn into a pension of Rs 23,748/month at an expected interest rate of 8% per annum. You will also get a lump sum of around Rs 8.9 lakh.  

Case-2: Rs 200 a day (= Rs 6000/month or Rs 72000 per year) 

Investing Rs 72,000/year ( = Rs 200x30x12) in PPF, one can get around 91 lakh in 30 years. Investing this amount in Jeevan Shanti will ensure a monthly pension of Rs 33,000/month. 

In contrast, investing Rs 6000/month in NPS will result in a monthly pension of Rs 47,497/month after retirement. One will also get a lump sum of approx Rs 17 lakh. 

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Case 3: Rs 1.5 lakh/year (= Rs 12500/month pr Rs 417 per day)  

Rs 1.5 lakh is the maximum amount one can invest in NPS. In PPF, one gets no tax benefit for amount invested above Rs 1.5 lakh in a year. 

Investing 1.5 lakh/year in PPF will result in Rs 1.9 crore at the age of 60. Investing this amount in Jeevan Shanti may give a monthly pension of Rs 1,36,740. 

In NPS, investing Rs 1.5 lakh/year, or Rs 12500/month, will give yoy approx Rs 98 thousand per month pension. You may also get a lump sum around Rs 37 lakh. 

Clealy, the above cases show that NPS may provide better returns if you are planning for retirement only. If you want a big lump sum in 15-20 years, PPF is a good option. Both NPS and PPF also offer several income tax benefits. 

Note: Online calculator has been used for this article. The final outcome may vary over a period of time, depending on the existing interest rates. Read complete details about both NPS and PPF before investing your money)