Week 47: NPS vs Index funds

After understanding the What and Why of NPS, I wanted to compare it with Index funds in terms of Investment style, Equity exposure, and Benefits.

NPS vs Index funds

Parameters NPS Index funds
Portability You can switch your pension fund manager without exiting the funds. You've to exit-reinvest your funds to change your fund manager.
  • Age < 60: Full withdrawal if the corpus is < ₹ 2,50,000 and completed 5 years since inception.
  • Age < 60: Partial withdrawal for Higher education or Marriage of children, purchase of land, treatment of critical illness [1].
  • Age > 60: 60% of the corpus; rest will be used to purchase an annuity.
You can withdraw as and when required.
Diversification in equity Top 200 stocks [2]
  • 50 stocks, if tracking Nifty.
  • 30 stocks, if tracking SENSEX.
Investment style Though regulated, stock picking within the range of top 200 market cap stock is technically active. Passively mirroring the index
Tax benefits ₹ 1,50,000(80 CCE) + ₹ 50,000 80 CCD(1B) = ₹ 2,00,000. NA
Maximum equity allocation 75% [3] 95% [4]
Historical returns (Mini. 5yrs) 12.54% 14.61%
Expense ratio 0.09% [5] 0.06%


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