NPS Vs PPF: Which is a Better Retirement Scheme?

The National Pension Scheme (NPS) and Public Provident Fund (PPF) are two of the most popular long-term investment schemes that are especially used for retirement. However, which is a better option? Let’s take a closer look at both the schemes first.

What is National Pension Scheme?

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The National Pension Scheme was rolled out by the government in 2004 under which the eligible citizens of India can invest their money to enjoy decent returns after retirement.
The NPS scheme has two tiers, i.e., Tier 1 and Tier 2. The former is strictly for the government employees, and the latter for individuals.

Tier 1

•  The account can be opened with a minimum initial contribution of Rs. 500.
• The account must have a minimum balance of Rs. 6,000 by the end of each year.
• At least one contribution must be made to the account each year.

Tier 2

• The account can be opened with a minimum initial contribution of Rs. 1,000.
• The account must have a minimum balance of Rs. 2,000 by the end of each year.
• At least one contribution must be made to the account each year.

What is Public Provident Fund?

PPF is a savings-cum-tax-saving instrument that was launched way back in 1968. This is the reason why it’s more widely known than the NPS.

Under PPF an individual has to make a minimum contribution of Rs. 500 or a maximum of Rs. 1 lakh each year.

NPS Vs PPF

The following are the main differences between NPS and PPF:

• An NPS account can be opened by an NRI as well as resident Indians. However, in case of PPF, only resident Indians are allowed to open the accounts.
• A person can open an NPS account only if they are at least 18 years old. However, PPF accounts can be opened by even minors with the help of their parents.
• The interest rate for NPS varies from 10% to 12%. That of PPF is fixed at 8.60%.
• NPS requires a minimum contribution of Rs. 6,000 per year. PPF requires only Rs. 500

Both NPS and PPF are excellent retirement schemes. So, one may be better than the other for each individual depending on what they are looking for in an investment.