NPS vs SIP vs EPF: What Rs 8,333 and Rs 10,000 monthly investments for 30 years in each scheme can help you get; see examples
NPS vs SIP vs EPF: NPS has Tier I and Tier II accounts. The starting investment age is 18 years, and the maximum age is 75 years. In EPF, the minimum monthly contribution is Rs 1,800, and the maximum is up to 12 per cent of the basic salary and dearness allowance of the employee. Systematic investment helps one fight market fluctuations since SIP provides rupee cost averaging, where an investor buys the same NAV at different prices.
NPS vs SIP vs EPF: National Pension System (NPS), Employees' Provident Fund (EPF), and Systematic Investment Plan (SIP) in mutual funds are the options that can be considered for retirement planning as well as long-term investment. The benefit of investing in NPS and EPF is that deposits, interest earned, and the maturity are tax free. SIP earnings are taxed based on the type of mutual fund—equity or debt. But SIP investment can give higher post tax returns compared to EPF and NPS in the long run. In this write-up, know how these 3 investment options work and how Rs 8,333 and Rs 10,000 investments a month for 30 years can bring in each of these schemes.
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What is NPS?
NPS has Tier I and Tier II accounts. One can invest monthly or once in a financial year in NPS. The starting investment age is 18 years, and the maximum age is 75 years. At 60, an NPS subscriber has the option to withdraw up to 60 per cent of their retirement corpus. They have to buy annuity from the rest of the 40 per cent amount to get a monthly pension. Lump and annuity withdrawal in such a case will be tax free. Investments up to Rs 2 lakh in a Tier I NPS account provide tax benefits. If one doesn't want to withdraw money at 60, they can continue their NPS account till 75.
What is EPF?
This is a retirement scheme for private sector employees where the employer and the employee contribute to the EPF account of the employee. The minimum monthly contribution is Rs 1,800, and the maximum is up to 12 per cent of the basic salary and dearness allowance of the employee. The employer's contribution also goes to Employee Pension Scheme (EPS), which provides a monthly pension to the employee. The current interest rate in EPF is 8.25 per cent. Investments up to Rs 1.50 lakh in a financial year in EPF provide tax benefits under Section 80C of the Income Tax Act.
What is SIP?
SIP allows an investor to invest a prefixed amount at a regular interval—daily, monthly, quarterly, or yearly—in a mutual fund scheme. Investors can also opt for a step up SIP, where their SIP amount increases at a prefixed interval. Systematic investment helps one fight market fluctuations since SIP provides rupee cost averaging, where an investor buys the same net asset value (NAV) at different prices. SIP investment in the long run can help one build a sizeable corpus post tax.
NPS vs SIP vs EPF: What Rs 8,333 and Rs 10,000 monthly investments in NPS can give in 30 years
In NPS, one can get up to 75 per cent equity exposure and 25 per cent in debt. With such a combination, we may expect 10 per cent annual growth in NPS. If you invest Rs 8,333 a month in the scheme, in 30 years, the total investment will be Rs 29,99,880, and the estimated total corpus will be Rs 1,89,93,618.
If you invest Rs 10,000 a month, in 30 years, your investment will be Rs 36 lakh, estimated total gains will be Rs 1,91,93,254, and the maturity amount will be Rs 2,27,93,254.
NPS vs SIP vs EPF: What Rs 8,333 and Rs 10,000 monthly investments in EPF can give in 30 years
At an 8.25 per cent interest rate, a Rs 8,333 investment a month, or Rs 1 lakh a year, in EPF can help one get an estimated maturity value of Rs 1,28,39,146.46 in 30 years.
If you invest Rs 10,000 a month in EPF, the estimated maturity amount after 30 years will be Rs 1,54,07,592.06.
NPS vs SIP vs EPF: What Rs 8,333 and Rs 10,000 monthly investment in SIP can give in 30 years
As far as SIP investment is concerned, one can invest in a debt, hybrid, or equity mutual fund.
NPS vs SIP vs EPF: What Rs 8,333 and Rs 10,000 monthly investments in debt fund SIP can give in 30 years
If one invests Rs 8,333 monthly in a debt mutual fund and expects an 8 per cent annual growth, the estimated corpus after 30 years will be Rs 1,25,01,960, where Rs 95,02,080 will be the estimated long term capital gain.
If you invest Rs 10,000 a month, your estimated gain will be Rs 1,05,76,132, and the expected wealth will be Rs 1,41,76,132.
NPS vs SIP vs EPF: What Rs 8,333 and Rs 10,000 monthly investments in hybrid fund SIP can give in 30 years
If they invest Rs 8,333 monthly in a hybrid mutual fund and expect a 10 per cent return, their estimated corpus after 30 years will be Rs 1,89,93,618, of which an estimated Rs 1,59,93,738 will be long term capital gain.
A Rs 10,000 monthly SIP at the rate of 10 per cent annually will give an estimated long-term capital gain of Rs 1,71,92,927, and the expected amount will be Rs 2,07,92,927.
NPS vs SIP vs EPF: What Rs 8,333 and Rs 10,000 monthly investments in equity fund SIP can give in 30 years
If one invests Rs 8,333 monthly in an equity mutual fund and expects a 12 per cent return, the estimated corpus after 30 years will be Rs 2,94,14,771, where Rs 2,64,14,891 will be the estimated long term capital gain.
A Rs 10,000 monthly SIP in the fund can give you estimated long-term capital gains of Rs 2,72,09,732, while the estimated amount will be Rs 3,08,09,732.