EPF vs NPS: Rs 10,000/monthly investment in each; where you may get a higher retirement corpus?

The National Pension System (NPS) and the Employees’ Provident Fund (EPF) are two popular ways of creating a retirement corpus. Some people contribute to both, while others pick one of them. But which retirement scheme may help you generate a higher retirement corpus in 30 years if you start investing Rs 10,000 every month and increase the investment amount by 5% every year?

The corpus will depend on the return you get from the NPS and the EPF. While the EPF offers an interest rate that is reviewed by the government every year, the corpus in NPS depends on the return you get from different components of your investment- equity, bonds, etc.

Let’s figure out the corpus you may generate from the NPS and the EPF if you start investing Rs 10,000 from 30 years of age and increase 5% contribution yearly till 60 years of age.

Assumptions for EPF calculation

For the EPF calculation, the following assumptions have been used:

Particulars Assumption

Current age: 30 years

Retirement age: 60 years

Basic salary + DA: Rs 83,333 per month

Employee EPF contribution: 12%, or Rs 10,000/month

Annual increase in EPF contribution: 5%

EPF interest rate 8.25%

Investment period: 30 years

Existing EPF balance: Nil

Projected corpus: ?


As per the estimate, with a Rs 10,000 monthly contribution that increases by 5% every year, an EPF subscriber may generate an estimated retirement corpus of Rs 4,43,52,549.

Here, we are also calculating the employer’s contribution, which is 3.67% of basic pay. We are also assuming that the EPF interest rate won’t change in 30 years. However, in reality, the EPF interest rate keeps changing. It was 12% from 1986-87 to 1999-2000 and 9.50% in 2010-2011. After that, the highest rate that the EPF offered was 8.75% in 2013-14 and 2014-15.

Assumption for NPS retirement corpus calculation

Current age- 30 years

Retirement age- 30 years

Monthly contribution- Rs 10,000

Annual increment in contribution- 5%

Sector- Non-government

Investment choice- Active Choice (75% equity + 25% government bonds)

Return- 12.7% (As auto-picked by the NPS Trust calculator)

Retirement corpus- ?

As per the NPS Trust calculator, the estimated retirement corpus that you may generate as per the assumptions is Rs 5.30 crore.

If you withdraw the 60% lump sum amount from this corpus at retirement, the estimated amount will be approximately Rs 3.18 crore.

If you purchase an annuity from the rest of the 40% retirement corpus, from which your expected annualised return is 6.75%, the monthly pension that you may withdraw from the annuity plan will be approximately Rs 1.19 lakh per month.

However, EPF and NPS calculations are assumption-based, and depending on future returns, the amount that you may get after 30 years may differ.

What is the Employees’ Provident Fund (EPF)?

The EPF offers an interest rate compounded yearly to its subscribers that helps them build a retirement corpus. The current EPF interest rate is 8.25%, which is reviewed every year by the Finance Ministry. The employee and the employer make contributions to the EPF account of the employee. The interest amount is credited to the EPF account at the rate declared for the relevant financial year. The Employees’ Provident Fund Organisation (EPFO) says interest is credited on a monthly running balance basis at the statutory rate declared for each year. The EPF membership is mandatory for organised sector employees having a basic salary of up to Rs 15,000. For organised sector employees who joined their service on or after September 1, 2014, the EPF membership is optional. However, once they take the EPF membership, they need to contribute continuously.

What is the National Pension System (NPS)?

The NPS works differently. An NPS subscriber can invest money in different pension funds which further invest in different types of asset classes such as equity, corporate bonds, government securities, etc. An NPS subscriber can also choose an investment strategy such as Active Choice or Auto Choice. Returns are market-linked, and therefore, are not fixed.