Home / Money / Personal Finance /  How does NPS compare with EPF, ELSS and PPF schemes?
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The National Pension System (NPS) is available to all Indian citizens between the ages of 18 and 70 years. Its end goal is to provide you with financial security on your retirement. This article will help you understand whether NPS can score over Employees‘ Provident Fund (EPF), Equity-linked Savings Scheme (ELSS) and Public Provident Fund (PPF) if you plan to invest for your retirement. 


“The similarity between the EPF and NPS retirement plans is that both avenues invest your money across debt and equities. However, the difference between them is that you do not get to choose your fund manager with EPF," says Ajit Kumar, chief strategy officer, KFintech. 

“In the case of NPS, though, you can not only choose the fund manager, but also switch between fund managers if you are not happy with the performance of your funds. NPS can be said to be a more evolved retirement plan that considers your age and risk appetite. It allows you to decide on the assets you want to invest in, based on your return expectations," said Kumar. 


ELSS is a form of equity mutual fund which allows you the benefit of saving taxes on investments up to 1.5 lakh under section 80C, just like NPS. 

However, with NPS, you also can save an additional 50,000 under section 80CCD (1B). 

Also, on maturity, you have the provision to withdraw 60% of the entire corpus as a lump sum entirely devoid of taxes. At the same time, you can purchase an annuity with the remaining amount. 

Since ELSS is totally based on equity, it carries substantial risk, while NPS caps equity allocation at 75%, making it a comparatively lower risk  instrument than ELSS. 

Furthermore, NPS also allows you to invest in assets like corporate bonds and government securities, which are at lower risk than equities. On the flip side, returns from NPS can be lower. 


PPF is a savings scheme introduced by the government and designed to offer fixed returns over 15 years and is not limited to pensions, unlike the NPS, which is exclusively a pension savings scheme. 

Kumar said, “Since NPS is market-based and carries a certain amount of risk, the average returns are higher in the long term. While one cannot say that NPS is better than PPF, one can say that NPS can help one create a higher corpus in the long run, which can help you secure your finances better." 

It is, thus, vital for you to decide the right option depending on your investment goals, earnings and living expenses, and most importantly, your risk tolerance.

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