NPS Tier 2 vs Mutual Funds: One of the government schemes that has seen growth every year is the National Pension System (NPS).
This pension and investment option brings an attractive long-term savings route to effectively plan your retirement through safe and regulated market-based income.
At the same time, SIP has become very popular among mutual fund investors over the years.
National Pension Scheme
The scheme is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). National Pension System Trust (NPST) established by PFRDA is the registered owner of all assets under NPS. A person who wants to open an NPS II type account should first open an NPS I type account.
NPS II type account
NPS Type I is a Mandatory Retirement Account, whereas Type II is a Voluntary Savings Account linked to your Permanent Retirement Account Number (PRAN).
It works like a mutual fund account with no lock-in period. Provides more flexibility in terms of withdrawals.
Mutual funds
An investment fund that pools money from many investors to buy securities. Advantages of mutual funds include diversification, liquidity and professional management.
National Pension Scheme
Investment – Rs.10 thousand per month
Start of investment – 25 years
Investment maturity – 35 years ie 60 years
Annual return – 10 percent
Total investment – 42 lakhs
Total Corpus – Rs.3 Crore 82 Lakh 82 Thousand 768
Expected monthly income is Rs.1 lakh 14 thousand 848
Which is the best?
Investors have so many options in the market today that it is very important to choose the one that suits them best as there cannot be one size fits all
An investor can make a decision based on their target, market knowledge and investment skills.
NPS is a good option for those looking for a handsome retirement corpus. Mutual funds are suitable for those looking for a diversified investment portfolio for the long term.
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