NPS vs Mutual Funds, PPF, and FDS | Mint

At 40, many professionals start thinking more seriously about retirement planning. But with so many investment options – extra funds, PPF, FDS and now NPs – it’s easy to be overwhelmed. In aeration 6 of “NPS Made Simple”, Subhazis Ghosh, CEO of Kotak Mahindra Pension Fund, helps the key question: How does NPS compare to other general savings instruments? Through the lens of a couple in the middle of the career in their forties, the episode performance examines, tax treatment, long-term viability, and which makes NPs a compelling and often overlooking choice. Question: Is it too late to start in your 40s? Not at all. Ideally, you should start in your 20s or early thirties, but if you don’t, your 40s are still a very viable window. You will have more income at this stage, and the NPS allows you to contribute to the age of 70, giving you time to build a meaningful corpus. Q: How do NPs compare to traditional options such as PPF or fixed deposits? Let’s take them one for a while.PPF: That’s fine, but has a fixed term of 15 years (extended by 5), and yields are fixed, not connected by the market. NPS, on the other hand, allows up to 75% share allocation, which offers significantly better long -term returns. FDS: The term of office usually maximizes at 10 years. FD rates are also fully taxable, and inflation can erode real returns. NPS offers tax -efficient growth and lasts beyond an FD’s life span. Q: What kind of tax benefits offer NPs above the other? In both old and new tax regimes, NPS offers exclusive deductions. £ 1.5 lakh under section 80ccd (1) an additional £ 50,000 under section 80ccd (1B) employer contributions under section 80CCD (2): up to 10% of the salary (or 14% for civil servants) “No other instrument offers this level of tax benefit in both regimes,” Ghosh. Q: What about mutual funds? Do they not offer better flexibility and growth? Mutual funds are large, but they have higher fund management costs and no guaranteed tax -free status at exit. NPS, on the other hand, is the world’s lowest costs actively managed, and withdrawals at maturity are partly tax -free. You can also switch asset allocation or fund managers within NPS without activating tax or exit tax – something that mutual funds cannot match. Q: Is it wise for both partners in a couple to invest in NPS? Absolutely. Even if one spouse already receives a government pension, the other still has to open their own NPS account. “Why lose the tax benefits and long -term growth? You also need two retirement income,” says Ghosh. He adds: “One pension may not be enough to cover household expenses with rising inflation.” Question: And what about those who feel they are too late and will not benefit much now? It’s a myth. Unless you are actively managing a high-risk equity portfolio-and do well-offered NPs better net returns than most savings instruments due to: low fund management costs on long-term compounded built-in discipline tax savings at both the entry to the time “it’s not about timing. “Even in your forties, NPS offers a structured, tax -efficient path to retirement.” Pick up: Whether you are in your 20s or in your forties, NPS earns a place in your financial portfolio – especially if you are looking for retirement security with tax efficiency and low cost. As Ghosh puts it: “NPS is not just an option. It’s an advantage.” Look at episode 6 to see NPS stack against other investment instruments – and why this is the smartest choice for your retirement years. Note for the reader: This article is part of Mint’s Paid Consumer Connect initiative and is created independently by the brand. Mint does not accept editorial responsibility for the content, including the accuracy, completeness or any errors or omissions. Readers are advised to verify all information independently. First published: 28 Apr 2025, 06:24 pm Ist