Why VPF, NPS should be in your retirement portfolio
retirement planning has been a crucial financial goal for most people, more so for private sector employees who do not have pension security. Voluntary provident fund (VPF) and national pension system (NPS) are two schemes that work well for such employees and other conservative investors. That’s what Venumadhav (51), a resident of Bengaluru who is employed at a startup there, does.
He realized somewhat late in his life that he needed to perk up his retirement portfolio. He was in his late 40s and was looking for safer instruments to accumulate his retirement corpus “I could have opened a public provident fund (PPF) but the lock-in period of 15 years dissuaded me. I chose VPF because no other product in the fixed income category would have given me more than 8% returns," says Venumadhav.
VPF is a way to increase employee provident fund investment, which is usually 12% of the basic salary. Here is more on how VPF and NPS work. Most investors are hugely concerned about the returns that a financial product offers.
But they need not worry where it concerns either VPF or EPF: the interest rate was a healthy 8.15% for FY23. To be sure, it is reviewed every year and is mostly on the higher side compared to other government savings schemes such as PPF, national savings certificate and kisan vikas patra. NPS returns are linked to the market. There are different NPS schemes based on predominant exposure in equities, corporate bonds, or government securities.
“EPF/VPF and NPS both invest in equities and debt but the former is not unitised. It means the rates largely remain the same, while NPS returns are market-linked. NPS equity schemes could easily give more returns than EPF/VPF..
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