EPF vs NPS vs SIP: What will be retirement corpus on Rs 12,500 monthly investment in each scheme; see calculations to know

It is a market-linked investment option where an investor can select equity exposure (from 25 per cent to 75 per cent). NPS funds follow the Nifty 50 index, so the scheme is known to provide consistent returns in the long run. One can open an NPS account at the age of 18 and can contribute till 75. They can invest in phases or monthly. 

At 60 years of age, NPS account holders get the option to withdraw their retirement corpus up to 60 per cent. From the rest of 40 per cent, they need to purchase an annuity plan, return from which helps them provide a monthly pension. Investment in a Tier I NPS account provides tax benefits up to Rs 2 lakh in a financial year. The retirement corpus generated through a Tier I account is tax-free.

EPF is a non-market-linked retirement scheme where the employer deducts a monthly amount from the salary of an employee and credits it to their EPF account. The employer also contributes an equal amount to the employee's EPF account. The scheme provides an 8.25 per cent interest rate to EPF subscribers. 

The minimum contribution from the employee's side is Rs 1,800, while they can invest up to 12 per cent of their basic salary and dearness allowance (DA). The employer's contribution goes to the employee's EPF account and Employees' Pension Scheme (EPS) account. Contributions up to Rs 1.50 lakh in a financial year in EPF, the interest earned, and the maturity amount are tax-free for an EPF subscriber.

It is a fixed investment (daily, weekly, monthly, or yearly) in a mutual fund scheme. The investor buys net asset units (NAVs) of a mutual fund scheme when it invests through SIP. The advantage is that unlike in lump sum, the investor purchases NAVs at different rates at every investment cycle. 

This provides them the benefit of rupee cost averaging, where they accumulate more NAVs when the market is down and fewer when the market is high. This compound growth effect in the long run can provide good returns to investors. 

PFRDA’s assumption for annualised return on 75 per cent equity and 25 per cent government security selection in an NPS account is 12.86 per cent. So, we are taking that as the rate of return for our calculation.
The investment in 25 years will be Rs 37,50,000, estimated returns will be Rs 2,06,53,031, and the estimated retirement corpus will be Rs 2,44,03,031.

At an 8.25 per cent interest rate, the EPF estimated retirement corpus on a Rs 12,500 monthly contribution for 25 years will be Rs 1,23,12,957. 

Since we can't predict SIP returns. We are taking standard annualised return of 12 per cent for an equity fund, 10 per cent for a hybrid fund, and 8 per cent for a debt fund. 
At an 8 per cent annualised return in a debt fund, a Rs 12,500 monthly investment will give an estimated retirement corpus of Rs 1,14,35,493.

At 10 per cent annualised return in a hybrid fund, a Rs 12,500 monthly investment will give an estimated retirement corpus of Rs 1,55,39,495.

At 12 per cent annualised return in an equity fund, a Rs 12,500 monthly investment will give an estimated retirement corpus of Rs 2,12,77,582.