National Pension Scheme vs Fixed Deposit: Choose the Right Choice
Some individuals get wealthy while others remain impoverished. One may have a solid career earning well, but others may be far ahead in terms of wealth held. Wealth building demands an intelligent investment strategy. There is no use keeping your money in bank accounts. Your money has to be invested so that it may develop into riches and make you prosperous one day. That is why it is necessary to consider investing in products such as fixed deposits (FDs), EPF, PPF, NSC, and National Pension System (NPS).
Financial planning is vital for life. There is no later point in life when an individual cannot do the same. It promotes financial discipline, helps increase hard-earned money, and gives financial stability when necessary. However, financial planning may be complex, frequently dangerous, or unclear for beginners. There are different instruments of investments in which a person may deposit their money. However, all these instruments come with various risks and rewards. Experts usually encourage people to broaden their horizons for optimum profits and reduce dangers.
FD versus NPS
In the aftermath of declining interest rates and pandemics, individuals seek secure investment solutions that offer them attractive returns. NPS and FD are two of the most sought-after investment alternatives that suit the demands of the clients. Let us continue reading to comprehend both and determine the essential elements of FD vs NPS.
Fixed Deposit
A Fixed Deposit (FD) provides you interest on deposits locked in for a specified amount of time. Fixed deposit begins when you invest a set quantity of money for a limited time. The sum is then frozen, and you get your principal and interest only once the FD matures, i.e. when the investment duration is complete. The duration of an FD could vary from 7 days to 20 years, with varied FD interest rates for each period.
What is NPS?
NPS, short for the National Pension System, is India’s voluntary donation pension scheme. The government-backed pension program allows you to put your money for the long-term for future retirement. The investment strategy is under the supervision of the PFRDA and the national government.
Many individuals are keen to discover the best alternative to select between FD and NPS. Here is a detailed look at FD versus NPS.
How does NPS work?
Residents from the public, private, and unrecognized sectors may apply for the NPS system. Individuals belonging to the Indian armed services are not eligible for the National Pension System.
Through NPS, you may invest a portion of your salary throughout your working life for a monthly pension after retirement. Post your retirement; you may also take a set proportion of the money invested as a lump payment. As noted previously, the remaining is given as monthly/quarterly pension. However, it would be best to notice that you cannot opt out of the plan and withdraw your money ten years after your investment begins.
Features and Advantages of NPS
There are various advantages and benefits of investing in NPS. Here are some of the primary NPS advantages that one will get with their investment.
Liquidity: There are two sorts of accounts that you may utilize to donate to NPS: Tier-I and Tier-II. Each of these accounts has a lot to offer and serves a broad range of liquidity objectives.
Tier-I: This is a default account where withdrawals are not authorized. The Tier-I account is essential for everyone who selects the NPS system.
Tier-II: This is a voluntary sort of account whereby withdrawals are authorized. The minimum NPS contribution is ₹250.
Flexibility: NPS enables you to set the investment amount and control your plan. You may choose auto-choice, whereby a fund manager will be administering your investment. You may also actively pick the asset classes where you want to focus your investments.
Withdrawal: NPS is excellent for saving money for your post-retirement life. If required, you may even withdraw a portion of your whole NPS corpus after just three years.
Though NPS is a lucrative investment option, you cannot use it for your regular expenses freely. Therefore, if you need some extra funds for managing your expenses after a few months then the NPS will not come in handy. To tackle this, you can invest a portion of your income in a high-paying FD like Bajaj Finance FD. The high returns offered by this FD scheme along with the features mentioned below make it an uncomplicated and beneficial investment alternative for you:
Higher returns
You will get sufficient returns after investing in this FD scheme as an FD interest rate of up to 7.25% can be availed by investing in fixed deposit plans from Bajaj Finance. This is one of the best FD interest rates in India which will help you to carry out your future investment plans without any issues.
Regular interest payout
Bajaj Finance FD can be used to take care of your regular expenses post-retirement or even during your employment years. This is because the non-cumulative FDs offered by Bajaj Finance lets you withdraw the accumulated interest as a payout after every 1, 3, 6, or 12 months.
Senior citizens get an extra 0.25% on investing in its FD plans whereas investors are eligible for 0.10% on utilizing the online FD form for investing.
Loan against FD
If you need a higher amount for your child’s marriage, medical emergency, or for any other reason, you can apply for up to 75% of your FD value as a loan. This nullifies the need of withdrawing your deposits prematurely and your deposits will keep on growing till the maturity date.
Safety
Bajaj Finance FD carries the highest credit rating of FAAA/stable from CRISIL and MAAA/stable by ICRA. This indicates that your capital is safe and you will receive your returns on time without any hassles.
Conclusion
The National Pension Scheme can be one of the most significant possibilities for long-term investment, but it is not advised as a short-term investment option. By investing in Bajaj Finance FD, you may enjoy the best of both worlds as it provides a choice of strategies to achieve both short-term and long-term objectives. The Bajaj Finance FD is also free from any market risks, unlike NPS, and gives guaranteed returns that reach as high as 7.05% p.a.