The average NPS return in 1-year corporate bonds has been 13.59 per cent. Returns of 9 per cent in 3 years, 10.34 per cent in 5 years and 10.31 per cent from the inception of the scheme till 2019.
Retirement planning is important for every person’s life. For retirement expenses, it is necessary to save a little money and collect a big corpus. That money will come in handy later. Large funds will be able to add up only if you start investing from an early age. Invest in those instruments which are at the rate of inflation and get the interest so that inflation can be met. When it comes to retirement funds, two investment avenues are considered the most important. First National Pension System or NPS and second Mutual Fund SIP. After comparing both the investments, money can be deposited considering the returns.
NPS was started in 2004 by the central government. Initially this scheme was only for government employees. Later it was extended to the private sector as well. In 2009, NPS started for the people of the private sector apart from the government employees. In this scheme, money is deposited during the entire job and in the end a huge fund is available for retirement. At the time of retirement, 60% can be withdrawn and the remaining 40% has to be deposited in an annuity plan. On the basis of this money, pension is given to the depositor every month.
Features of NPS
According to your convenience, money can be deposited in this scheme. There is no specific rule about how much money has to be deposited continuously in this scheme. In this, pension contribution is invested in pension fund schemes and employees can know the value of investment on a daily basis. In NPS all the depositors have to open an account at their nodal office and get a Permanent Retirement Account Number (PRAN). In this, each employee is identified with a unique number and has a separate PRAN which can also be ported. That is, it remains the same even if the employee is transferred to another company.
According to the new rules of NPS, the depositor is given an opportunity to invest his fund under Active Choice and Auto Choice. In Active Choice, the depositor will be able to invest his funds in the asset class. Under Auto Choice, only a predetermined amount is invested according to your age.
How much return
The money of NPS is less stored in equity shares or stocks, hence the chances of getting returns are also reduced. It has been seen in most of the cases that the NPS scheme gives an annual return of 8-10 percent. However, if you look at FD or some other investment instruments, then NPS gives higher returns. Talking about other investments, the average NPS return in 1-year corporate bonds has been 13.59 percent. Returns of 9 per cent in 3 years, 10.34 per cent in 5 years and 10.31 per cent from the inception of the scheme till 2019.
In government bonds, the returns of 20.28 percent in 1 year NPS, 10.29 percent in 3 years, 11.56 percent in 5 years and 10.15 percent from the inception of the scheme to 2019 have been given. In alternative assets, the returns of 9.89 per cent on 1-year NPS and 7.67 per cent have been given since the inception of the scheme. Overall, on an average, NPS gives a return of 8-10 per cent.
what happens in sip
In mutual fund SIP, a fixed amount has to be deposited with a fixed tenure. In this, investment is made in a fund and the benefit of the return on it is given to the depositor. The money deposited in SIP is invested in equity shares and stocks, debentures, bonds, bills etc. If invested for a long time, then SIP gives high returns. Investing in a diversified equity portfolio through SIP at an early age has the potential of better returns.
The benefit of compounding is available in SIP and less amount becomes more on maturity. Investors can also deposit in fixed income funds such as debt funds. Where the return of 8-10 percent is available in NPS, the same can take returns of 14-18% in mutual funds. However, mutual funds have the risk of falling in the market whereas NPS have higher potential for guaranteed returns.
