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National Pension System Vs. PPF

Published On Feb 27, 2022 10:30 AM By InsuranceDekho

It's vital to evaluate how much money you'll need in retirement to live a comfortable life while planning your retirement savings strategy. Examine expenditures including whether or not a rent or mortgage payments would be required, but if so, how much would be paid. Retirees will normally require 80% of the pre-retirement earnings to sustain their current standard of living.

Both the National Pension System and the Public Provident Fund (PPF) have significant benefits when it comes to the post-retirement future. Both of these are long-term investment strategies. Despite their fundamental similarities, these two pension plans have significant differences. Understanding these notions will help you make a final decision and choose which of the two solutions looks to be the greatest fit for your specific situation. While comparing NPS with PPF, there are a few things to keep in mind. To get to understand more about the National Pension System and PPF, read on.

National Pension System Vs. PPF

Which Investment Option Is Better For A Person To Invest In?

This is a challenging question to respond to. The first thing that comes to mind when we think of saving for a post-retirement fund is the Public Provident Fund (PPF). PPF is a fantastic long-term investment choice since it provides assured profits throughout time and also for adults of all backgrounds. However, as a method to save for retirement, the National Pension Scheme, or NPS, has recently attracted a lot of attention. In the 2015-16 Budget, the government increased the usage of NPS by providing an additional tax deduction of Rs. 50,000 for NPS deposits.

Understanding PPF

PPF is a long-running government-funded investment scheme with a track record of long-term performance. To get the best results, you should devote at least 15 years!
Originally, there was really no way to close a PPF account early; however, this option is now available, with the caveat that now the account holder must keep the PPF account open for at least five years before closing it.
Only certain circumstances, such as investing in one's future education or paying medical expenditures, will allow for early closure (in case of life-threatening diseases and supported by documents from a medical practitioner)

Following are some of the listed things to take into consideration while opening a PPF account -

  1. PPF interest rates are now at 7.1 percent per year. On an annual basis, interest is compounded.
  2. Earnings get credited towards the account each year on March 31st.
  3. To earn the best interest, contributions must be made between the 1st and 5th of the morning, as interest is calculated on the lowest amount retained (i.e. the amount held on the 5th)
  4. If you've owned your PPF account for at least three years, you could also take out a loan against it. If you repay the loan completely full well before sixth year, you may be eligible for another loan.

Any Indian person can invest in a PPF. A person can have only one PPF account, unless the new account is now in the possession of a minor. NRIs and HUFs are not eligible for PPF accounts.

Understanding NPS

Now that we've covered the basics of the PPF, let us just glance at the NPS (National Pension Scheme). The National Pension Scheme (NPS) is indeed a government-sponsored savings plan for public, private, and unorganised industry employees (except for the armed forces). Under this arrangement, account holders might invest in a pension account on something like a regular basis throughout the life of their employment. When account holders retire, individuals can collect a part of the funds as a lump sum and the rest as a pension.
An Indian citizen in between the age group of 18 and 60 just at point of submission of application is eligible for the NPS. The account owner should follow Know Your Customer (KYC) rules to not be an unresolved bankrupt or mentally ill.


In every retirement portfolio, both the National Pension System and the Public Provident Fund possess their position and benefits. The purpose of a PPF is to provide a security net protecting customer investments while also generating high returns. NPS, on the other hand, offers a double advantage in that it protects your money while also increasing its value. It's no wonder that now the National Pension System is attracting greater attention, especially in light of the system's proposed reforms, which the government plans to implement soon.

Also Read: Everything You Need To Know About National Pension System

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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