Creating a strong fund for retirement is the biggest need of every working person. There are many schemes available in the market for safe savings and good returns, but EPF, PPF and NPS are considered to be the three most popular options. Which of these would be best for you to invest in depends on your age, risk appetite and future needs. Let us understand these three schemes in simple language…
EPF: Most reliable for employed people
EPF i.e. Employees Provident Fund has been the safest savings option for working people for a long time. In this, the contribution of both the employee and the employer is deposited every month and fixed interest is given by the government. The interest rate of EPF for the financial year 2024-25 is fixed at 8.25%.
The specialty of EPF is that it is completely risk-free and there is no tax on withdrawal of EPF after five years of continuous employment. It also creates a habit of disciplined savings due to automatic deductions while on the job. This makes it one of the best options for low-risk investors as it creates a large corpus at the time of retirement.
PPF: Tax-free and completely safe government scheme
PPF i.e. Public Provident Fund is the first choice for those looking for secure and tax-free returns. Currently the interest rate of PPF is 7.1% and it has EEE status i.e. investment amount, interest and maturity amount, all three are tax-free. This is a lock-in scheme of 15 years, which can also be extended for further 5 years. The facility of partial withdrawal at intervals and the option of taking loan makes it very flexible. PPF is very popular among the middle income group as investment is allowed only from ₹ 500 to ₹ 1.5 lakh annually. This is a strong plan for those looking for safe and stable returns over the long term.
NPS: Highest returns in long term
NPS i.e. National Pension System is better for those investors who want high returns in exchange for low risk. It is a market-linked scheme, in which money is invested in equities, corporate bonds and government securities. In the long term, NPS has given an average return of 911%, which is much higher than EPF and PPF.
In this, investors can decide their own fund manager and investment ratio. It is better for young investors because the market gives rapid growth in the long term. Additionally, an additional tax exemption of ₹ 50,000 is also available under section 80CCD(1B). On retirement, 60% of the amount is tax-free and monthly pension is made from 40%.
Which option is best for retirement?
No single plan can be called perfect for everyone. Experts believe that young investors up to 35 years of age should invest more in NPS, because equity gives better returns in the long term. At the age of 35 to 45 years, a balanced investment between EPF, PPF and NPS is best. For 45+ investors, safer options like EPF and PPF are better, as the risk should be kept low near retirement.
By creating a balanced combination of all three plans, you can create a strong, inflation-proof and stable retirement fund, which can become a major foundation of your financial security.