For young salaried employees, the Employees' Provident Fund (EPF) is often the first step towards building a retirement corpus, but should investors who already contribute to EPF also put money into the National Pension System (NPS)? According to experts, the two need not be viewed as competing retirement products. While EPF provides a relatively stable retirement foundation, NPS can add market-linked exposure and greater flexibility in asset allocation. For investors in their 20s and early 30s, a long investment horizon gives their contributions more time to compound effectively.
EPF alone may not be enough for a long retirement according to Sumit Shukla, MD & CEO of Axis Pension Fund. Investors should first estimate the retirement corpus they will require, assess how much their existing EPF savings could contribute towards that target and then identify the gap. Pranay Ranjan Dwivedi, Managing Director & CEO of SBI Pension Funds, views EPF and NPS as products that can coexist in a retirement portfolio. EPF is oriented more towards stability, with an interest rate declared periodically, while NPS provides a market-linked component. Under Common Schemes, equity exposure in NPS can go up to 75%, while eligible schemes under the Multiple Scheme Framework can provide equity exposure of up to 100%.
For investors between 25 and 30, time can be one of the biggest advantages when saving for retirement. Shukla suggested that a practical starting point could be around 5% of take-home income in NPS, with contributions gradually increased as salary rises. Starting with a relatively small contribution at 25 can be more effective than waiting until 40 and then trying to compensate with substantially higher contributions. With retirement potentially 30–35 years away, early contributions get several decades to compound effectively.
While young investors focus on building retirement corpus through EPF and NPS, understanding their net worth remains a critical but often overlooked financial habit. Net worth equals total assets minus total liabilities, encompassing bank balances, mutual funds, stocks, EPF, NPS, property, gold, and other investments, minus home loans, personal loans, vehicle loans, and credit-card dues. Unlike income, which measures cash flow over time, net worth measures financial position at a particular point in time, providing a more complete picture of financial progress than income alone. For many Indians, calculating net worth becomes a manual exercise involving bank statements, investment statements, insurance documents, and spreadsheets, as financial information often spans multiple institutions and platforms.
The case for starting retirement investments early does not mean young investors should lock away money they may need for emergencies. Shukla emphasized that an emergency fund should take priority over additional NPS contributions, although investors do not necessarily have to stop retirement savings while building that buffer. The emergency corpus should cover essential expenses and remain in accessible instruments, with health insurance and term insurance also important to prevent dipping into long-term savings for unexpected expenses. Knowing one's net worth can influence everyday financial decisions by providing clearer pictures of debt exposure and making insurance planning and retirement planning more effective.
