1. National Pension System (NPS)
- NPS-based monthly contributions result in market-linked equity/debt returns, which have historically been around 8-10% p.a." Although some fund managers have achieved higher returns in the long run.
- The deductions for Tier-I contributions under Section 80C/80CCD are available, along with an additional 50,000 under 80CCDA(1B).
- Individuals often allocate 10,000/month for 10 years, with the objective of investing in an index fund that can yield between 20-25% depending on equity mix and returns.
2. EPF and EPS are two separate financial instruments
- Salary workers can receive 12% of their income from EPF deductions and employer matching, which results in government-backed interest (8–9%) for the first decade of service and eligibility for EPS pension.
- While EPS pension starts after the employer's contribution, using EPF as your primary alternative savings can be a reliable strategy for building up your retirement fund over an extended period.
3. ULIPs, ULPs or DEPs are both Private UnitLinked Pension Plans (ULIPS) and Annuity Plans
- HDFC Life Smart Pension Plan, ICICI Prudential Signature Retirement Plan and MaxLife Wealth Advantage or SBI Life Retire Smart are among the leading insurers that provide 10 year premium terms and deferred annuity payouts.
- They integrate equity/debt exposure with insurance cover and loyalty supplementary features. Investing 10,000/month for 10 years can result in both corpus growth and regular annuity payouts.
✅ Obtaining a profitable pension plan after completing ten years of SIP
- Starting from a low point and maintaining steadfastness, moderate monthly contributions can be developed into 'significant' corpus over the course of 10 years.
- Blending government-sanctioned and market-based plans — NPS for enhanced long term equity exposure, EPF for improved debt interest, ULIPs/pension plans for secure income options.
- Keep track of fund performance annually - in either NPS/TierII or ULIP, you should regularly adjust your investment allocation or opt for better performing funds.
- Use Section 80C and 80CCD limits to claim full tax exemptions. Section 10(10A) exemptions apply to 60% of an annuity corpus withdrawn at retirement.
- To maximize returns and loyalty benefits, ULIPs that offer delayed pension start annuities are often wise to choose when paying off an anunite.
🧮 Sample Scenario (₹10,000/month for 10 years)
| Scheme | Estimated Annual Return | Approx. 10‑yr Corpus |
|---|---|---|
| NPS (balanced fund mix) | 9–10% p.a. | ₹18–22 lakh |
| EPF-equivalent saving | 8–9% p.a. | ₹16–20 lakh |
| ULIP pension plan with loyalty additions | market-correlated + additions | ₹15–18 lakh + life cover |
Post-vesting, you can withdraw 60% (tax-free often) and annuitize 40% for regular income.
🧠 How can we identify these three things?
- NPS promotes market-linked returns and tax efficiency.
- EPF/EPS are government guarantees that guarantee fixed and predictable growth.
- ULIPs/Annuity Plans: Add investment flexibility, insurance and pension options all together.
Mix these instruments based on your appetite for risk and need for guaranteed income to suit different investor needs.
✅ Final Tips
- What is your target amount of retirement and how much do you want to receive per month?
- Determine the expected interest rate. E.g. The percentages in the ULIPs are blended, with an additional 10% being NPS and an extra 15% being EPF.
- Use pension calculators from NPS or insurer websites for estimation.
- Maintain a systematic approach and review your allocation or premium levels on recurring days.