Home / Money / Personal Finance /  NPS Tier II account outperforms bank fixed deposits by wide margin

The impressive performance of National Pension System (NPS) schemes is gaining investor attention as the investors are looking for safer avenues to avoid the volatility in equity markets during the Covid19 times. Most NPS schemes have outperformed bank fixed deposits (FDs), the most favoured investment product of your country. Here we will see how NPS Tier II Account and bank fixed deposits fared and how these two compare with each other.

NPS Tier II is a voluntary account and having an NPS Tier I account is a prerequisite to open Tier II Account. You can invest and redeem from Tier II Account at your discretion provided you are not a Central Government employee claiming deduction under Section 80C for your contributions to Tier II Account.

A Central Government employee who invests in NPS Tier II Account can avail deduction under Section 80C maximum for an amount up to 1.50 lakh. Such accounts will have a lock-in period of three years.

NPS Tier II Account Scheme G, that invests in government bonds and related instruments has given double-digit returns in the last one year. The average returns in the category are 11.84%. Whereas a one-year fixed deposit with the country's top lender, SBI Bank fetches you an interest rate of 5.1%.

For other tenures also the NPS scheme has fared better than bank fixed deposits.

Here are the latest SBI fixed deposit interest rates below 2 crore for general public :

7 days to 45 days - 2.9%

46 days to 179 days - 3.9%

180 days to 210 days - 4.4%

211 days to less than 1 year - 4.4%

1 year to less than 2 years - 5.1%

2 years to less than 3 years - 5.1%

3 years to less than 5 years - 5.3%

5 years and up to 10 years - 5.4%

Here's the performance of NPS Tier II- Scheme G (Government Bonds)

Performance of NPS Tier II- Scheme G (Government Bonds) ; Returns as on August 12 ; Source: Value Research
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Performance of NPS Tier II- Scheme G (Government Bonds) ; Returns as on August 12 ; Source: Value Research

NPS Tier II Account allows four investment options -equities, corporate bonds, government bonds and alternate investments.

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