NPS vs SIP: Which can help generate larger corpus on Rs 10,000 monthly investment for 25 years; get calculations
Both NPS and SIP are popular investment options used to generate a retirement corpus. Compare to find out which scheme may help investors generate a larger corpus on Rs 10,000 monthly investment for 25 years; see calculations.
For an investor choosing between two different investment options is a common yet challenging part of investment. If you are confused between NPS and SIP, here we will discuss, which scheme may help generate a larger corpus on Rs 10,000 monthly investment for 25 years.
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(Disclaimer: Our calculations are projections and not investment advice. Do your own due diligence or consult an expert for financial planning)
What is NPS?
National Pension System (NPS) is a market-linked retirement pension scheme to help people invest for retirement. Citizens from all walks of life can invest in NPS. The subscribers can select equity exposure in the scheme up to their risk appetite and age, minimising their returns in the long term. Pension Fund Regulatory and Development Authority (PFRDA) regulates all pension schemes such as NPS in India.
What is SIP?
Systematic investment plan (SIP) is a method of investing in mutual funds that allows individuals to invest a fixed amount regularly, such as daily, weekly, monthly, or yearly. It is suitable for various financial goals, such as saving for a child’s education, planning for retirement, or building a retirement corpus for future needs.
NPS vs SIP
Difference: NPS is a retirement-focused investment scheme, while SIP is a method of investing in different assets, primarily mutual funds.
Purpose: The purpose of NPS is to create a tax-free retirement corpus and get a monthly pension. Whereas in SIP, the purpose is to invest in mutual funds to fulfil different financial goals.
Investment option in NPS
NPS in India offers two kinds of investment options to investors, active choice investment and auto choice investment.
Active choice investment in NPS
In the active choice investment, investors decide to invest in their choice of securities according to their risk appetite and age.
Auto choice investment in NPS
In auto choice investment, the scheme manager chooses the securities to invest on your behalf based on the age slab of the investor.
SIP in mutual funds
Depending on their risk appetite, investors can decide to invest in equity funds, debt funds, and hybrid funds.
NPS vs SIP: How much corpus investors can generate on Rs 10,000 monthly investment for 25 years in NPS?
In NPS, investors can get up to 75 per cent equity exposure and 25 per cent in debt. With such a combination, we may expect 12.86 per cent annual growth in NPS (we have taken the assumed rate of return as 12.86 per cent in line to PFRDA’s assumptions (75 per cent Equity & 25 per cent G-Sec).
If you invest Rs 10,000 monthly in the scheme. In 25 years, the total investment will be Rs 42,00,000, the estimated capital gains will be Rs 7,69,58,664, and the maturity amount will be Rs 8,11,58,664.
NPS vs SIP: How much corpus investors can generate on Rs 10,000 monthly investment for 25 years in equity funds SIP?
If investor invests Rs 10,000 monthly in an equity fund and expects a 12 per cent annualised return, the estimated corpus after 25 years will be Rs 1,89,76,351, where Rs 1,59,76,351 will be the estimated capital gains.
NPS vs SIP: How much corpus investors can generate on Rs 10,000 monthly investment for 25 years in hybrid funds SIP?
If investor invests Rs 10,000 monthly in hybrid fund and expects a 10 per cent return, the estimated corpus after 25 years will be Rs 1,33,78,903, where Rs 1,03,78,903 will be the estimated capital gains.
NPS vs SIP: How much corpus investors can generate on Rs 10,000 monthly investment for 25 years in debt funds SIP?
If investor invests Rs 10,000 monthly in debt fund and expects 8 per cent return, the estimated corpus after 25 years will be Rs 95,73,666, where Rs 65,73,666 will be the estimated capital gains.