National Pension System Vs PPF: Which is better?

Below is the verbatim transcript of Vaid's interview with CNBC-TV18.

Q: The National Pension System (NPS) is fetching near double-digit returns, which is at least a percentage point higher than what Employees' Provident Fund (EPF) or Public Provident Fund (PPF) offer. Will this trend continue and is it a one year wonder because of the stock market is doing well. How should investors approach the NPS vis-à-vis PPF and EPF?

A: I think NPS is going in a great direction; it is the right direction in which it is going. However, still early days for NPS. They are building their track record in terms of fund management. The basic unique selling point (USP), which NPS provides vis-à-vis other investment options -- accumulation stage of retirement fund, cost of fund management is very low and one do not have that option of accessing that kind of cost anywhere else and those are the advantages, which is reflecting in the performance of underlying NPS. However, when comes the question of comparing EPF, PPF with NPS, it is no-brainer as of now.

Go in for PPF and EPF but keep a watch on NPS and environment will become much clearer in terms of action once the new tax regime, which has been talked about comes out in which the exempt-exempt-tax regime, which one has been looking forward to, comes then the situation becomes slightly different. However, as of now it's in favour of EPF, PPF but keep a watch on NPS.

Q: Should you compare the NPS to some of the mutual funds because that is where the tax treatment seems to be more aligned?

A: That is right; NPS should be compared with mutual funds because money is being managed by some of the same fund managers under the asset management company structure itself. As I mentioned earlier, the cost is one big advantage in favour of NPS. The cost being paid is very low, it is one of the lowest cost of managing retirement point in the world is in India and that is they have done very well.

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Excerpts from Markets and Macros on CNBC-TV18 Watch the full show »

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Tags: Sumeet Vaid, Ffreedom Financial Planners, National Pension System, NPS, Employees' Provident Fund, EPF, Public Provident Fund, PPF, mutual funds, PFRDA, ULIP, insurance

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