NPS vs SIP vs EPF: What Rs 11,000 monthly investment in each of them can give in 20 years
Compare NPS, SIP, and EPF to discover the best long-term investment option. Learn how Rs 11,000 monthly in each can grow over 20 years, ensuring secure retirement savings.
When planning for retirement, selecting the right investment option is crucial. The National Pension Scheme (NPS), Systematic Investment Plan (SIP), and Employees' Provident Fund (EPF) are popular choices offering different benefits. In this article, we’ll compare these three options to help you understand what a monthly investment of Rs 11,000 in each could yield after 20 years. Whether you're looking for market-linked returns, guaranteed interest, or tax advantages, find out which investment aligns best with your long-term financial goals.
National Pension Scheme (NPS)
What is NPS?
The National Pension Scheme (NPS) is a government initiative aimed at securing retirement by encouraging citizens to save systematically. Managed by the Pension Fund Regulatory and Development Authority (PFRDA), NPS offers market-linked returns through investments in government bonds, corporate debentures, and shares.
Key Features of NPS:
- Market-Linked Returns: Funds are professionally managed, ensuring diversified portfolio investments.
- Voluntary Contributions: Subscribers can contribute at their own pace, but a minimum 40% must be used to buy an annuity upon retirement.
- Tax Benefits: Subscribers can enjoy tax benefits under Section 80C.
Returns on Rs 11,000 Monthly Investment in NPS (20 Years):
- Total Investment: Rs 52,80,000
- Interest Earned: Rs 4,62,14,523
- Maturity Amount: Rs 5,14,94,523
- Minimum Annuity Investment: Rs 2,05,97,809
Systematic Investment Plan (SIP)
What is SIP?
Systematic Investment Plan (SIP) is a method of investing in mutual funds where a fixed amount is invested periodically, making it easier for investors to benefit from market fluctuations through rupee cost averaging.
Key Benefits of SIP:
- Disciplined Investing: SIP ensures regular investment, promoting long-term growth.
- Rupee Cost Averaging: Investors buy more units when prices are low, reducing the average cost per unit.
- Power of Compounding: Small but regular contributions result in significant growth over time.
Returns on Rs 11,000 Monthly Investment in SIP (20 Years):
- Total Investment: Rs 26,40,000
- Estimated Returns: Rs 83,50,627
- Total Value: Rs 1,09,90,627
Employees' Provident Fund (EPF)
What is EPF?
The Employees' Provident Fund (EPF) is a government-backed scheme in which both employees and employers contribute a percentage of the employee’s salary. The current EPF interest rate is 8.15% per annum.
Key Features of EPF
- Mandatory Contribution: Both employee and employer contribute 12% of the employee's salary.
- Tax-Free Returns: Interest earned on EPF is tax-free, and the accumulated corpus is paid out upon retirement.
- Universal Account Number (UAN): This unique number allows easy access to the EPFO portal for checking balances and withdrawals.
Returns on Rs 11,000 Monthly Investment in EPF (20 Years):
- Contribution: 12% of basic salary and dearness allowance
- Rate of Interest: 8.15%
- Total Accumulated Amount: Rs 1,19,34,912 (with a 5% annual salary increment)