National Pension Scheme vs. Bajaj Finance FD: Which gives better returns?

National Pension Scheme or NPS is a pension scheme that you can opt to invest in if you want to remain carefree about your expenses after retirement. The main benefits of NPS include tax-free withdrawal of corpus and monthly pension that you receive post-retirement.

Another popular investment scheme in India is Bajaj Finance FD. It enjoys the trust of over 2 lakh customers and is one of the highest paying fixed deposit schemes in India. To find the better instrument among these two based on returns and other features, let’s compare them first:

NPS v/s Bajaj Finance FD: Interest Rate

The interest rate of NPS is not fixed as the interest rate relies on the assets in which you have invested and their performance. On the other hand, like other FDs, the Bajaj Finance FD interest rate remains constant throughout the tenor.

Therefore, the returns offered by NPS is never fixed whereas you can calculate the FD returns by using an FD calculator provided on the portal of Bajaj Finance. As of now, the interest rate of this FD scheme is pinned up at 7.25% which means that your deposits will fetch enough returns at maturity.

Bajaj Finance FD scheme provides an excess FD rate of 0.10% to online investors who utilize an online FD form and cKYC procedure while investing in its FD plans. Also, NPS does not provide an additional FD rate to senior citizens whereas Bajaj Finance offers an additional rate of 0.25% to senior citizens.

NPS v/s Bajaj Finance FD: Investment methods

NPS allows you to choose between Tier 1 and Tier 2 accounts. In both cases, you make contributions till the age of retirement but the Tier 2 account offers easy liquidity options than the Tier 1 account. Also, you can make a minimum investment of Rs. 1000 per year whereas the maximum investment amount is capped at Rs. 1.5 lakhs per year. A 60% of your contributions will be paid at retirement and the remaining 40% will be invested in an annuity that will provide you with a fixed pension every month.

Bajaj Finance FD scheme comes with two types of FDs. One is the cumulative FD which pays the interest directly at maturity whereas the non-cumulative FD allows you to withdraw the interest after every month, quarter, six-months, or year as per your financial requirements.

Also, since it is a one-time investment you can set a tenor ranging from 12 to 60 months as per your convenience. Bajaj Finance FD scheme is more flexible as it allows you to carry out your long term and short term financial plans with ease whereas NPS is a long term investment option.

NPS v/s Bajaj Finance FD: Withdrawal

NPS withdrawal policies depend on whether you have opened a Tier1 or Tier 2 account. The Tier 1 account allows you to make partial withdrawals for serious illness and crucial expenses like a child’s education, marriage, etc. after 3 years of service. A partial withdrawal is allowed once you complete 25 years of service. The Tier 2 account enables you to make multiple deposits and withdrawals but for that, you must open a Tier 1 account first and then you can apply for the Tier 2 account.

Bajaj Finance FD scheme comes with lenient withdrawal policies as you can withdraw your deposits anytime once they have completed 3 months from the deposit date. Also, a loan against FD is provided to cover your emergency expenses. Therefore, this fixed deposit scheme is certainly better in terms of liquidity options.

Both these investments are considered safe and stable. Though NPS invests your money further in market-linked instruments, it is considered to be safe as it is a government-backed scheme. On the other hand, Bajaj Finance Fixed Deposit has received the highest credibility ratings for securing the depositor’s money. As a result, you can invest in its FD plans without a second thought.

NPS is a pension scheme run by the government of India whereas the Bajaj Finance FD scheme is a corporate FD plan. Both these instruments have unique benefits and features but the latter is slightly better when it comes to ease of investment, the flexibility of tenor, and withdrawal options. Also, investors who need to have a clear idea about their returns would prefer the Bajaj Finance FD scheme as its FD calculator tells you the exact amount that you will be receiving at maturity whereas no such calculation can be done in the case of NPS.

Both these instruments are safe but the highest FD rate of 7.25% and the slightly better interest rate offered to online investors and senior citizens make the Bajaj Finance FD scheme an attractive investment option for you.

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