Angana and Srija, two friends in their 30s, were enjoying a cup of coffee when the topic of retirement planning came up. Angana trusts PPF because it offers safety and guaranteed returns. Srija, however, prefers SIP, hoping for higher growth. Curious to see which option would work better, they both decided to invest Rs 90,000 annually for 30 years. 

Years passed, and their investments grew. Now, it’s time to find out who built a bigger retirement fund. This comparison can also help you decide which option, PPF or SIP, can give you a higher return.

What is Systematic Investment Plan (SIP)?

SIP is a way of investing a fixed amount in mutual funds. Individuals can invest daily, monthly, quarterly, or yearly in a mutual fund scheme.

What is PPF?

Public Provident Fund is a government-backed retirement scheme that is eligible for tax deductions under Section 80C of the Income Tax Act. 

Interest rate in PPF

Currently Public Provident Fund is offering an interest rate of 7.1 per cent.

Annualised return in SIP

Since there are no fixed returns in SIP investment, we are calculating as per annualised returns of 8 per cent (debt fund), 10 per cent (equity fund), and 12 per cent (hybrid fund).

PPF calculation conditions: Rs 90,000/year investment for 30 years

Yearly investment: Rs 90,000 (monthly investment Rs 7,500x 12 months)
Time period: 30 years
Rate of interest: 7.1 per cent 

PPF: What will be your retirement corpus in 30 years with Rs 90,000/year investment?

On a Rs 90,000/year investment, the retirement corpus in 30 years will be Rs 92,70,546. The estimated total interest during that time will be Rs 65,70,546, and the invested amount during that time will be Rs 27,00,000. 

SIP investment conditions

Since there are no fixed returns in SIP investment, we are calculating as per annualised returns of 8 per cent (debt fund), 10 per cent (equity fund), and 12 per cent (hybrid fund). We’re also assuming a monthly investment of Rs 7,500(90,000/12)

SIP: What you can get on Rs 7,500 monthly investment for 30 years (hybrid fund)

At 12 per cent annualised growth, the estimated corpus in 30 years will be Rs 2,31,07,299. During that time, the invested amount will be Rs 27,00,000, and estimated capital gains will be Rs 2,04,07,299.

SIP: What you can get on Rs 7,500 monthly investment for 30 years (equity fund)

At 10 per cent annualised growth, the estimated corpus in 30 years will be Rs 1,55,94,695. The estimated capital gains will be Rs 1,28,94,695.

SIP: What you can get on Rs 7,500 monthly investment for 30 years (debt fund)

At 8 per cent annualised growth, the estimated corpus in 30 years will be Rs 1,06,32,099. The estimated capital gains will be Rs 79,32,099.

Also Read: EPS Pension Calculation: Rs 47,000 basic salary, 16, 22, and 30 years of service, find out your monthly pension