Life insurance and provident funds are popular investments in India and they provide pretty good returns. In 2024, both LIC and EPF will be the most popular investment choices this year, as interest rates are expected to get better. But which is the better investment choice, LIC or EPF?
Let’s go ahead and know about it!
LIC Investment Opportunities In 2024
A large selection of investment products are available from the Life Insurance Corporation of India (LIC), meeting a range of risk tolerances and financial objectives. Traditional plans and unit-linked plans are the two primary categories into which LIC’s offerings can be broadly classified. LIC will be the biggest player in the Indian insurance market in 2024.
Traditional Plans: These plans can provide you with guaranteed returns and life insurance coverage. The popular choices in the LIC product portfolio will include New Jeevan Anand, a conventional endowment plan with a death benefit and maturity benefit, and Jeevan Umang, which combines guaranteed benefits and loyalty additions. These plans are good for investors who are risk-averse and want life insurance with guaranteed returns.
Unit-Linked Plans (ULIPs): ULIPs are market-linked plans that invest a portion of the premium that you pay in the stock market. The returns depend on the performance of the underlying units. LIC offers various ULIPs, like SIIP and Jeevan Utsav, allowing you to choose a fund option that aligns with your risk tolerance. Though they carry some market risk, ULIPs have the potential to yield higher returns than traditional plans.
EPF Investment Opportunities in 2024
The Employees Provident Fund (EPF) in India offers a unique investment opportunity within your retirement savings.
Here’s what you can invest in 2024:
EPF Members Investment Scheme (EPF MIS): This program allows eligible members to invest a portion of their savings in a wider range of unit trust funds. A revised list of qualified funds was made available on April 1st, 2024 [EPF releases revised list]. There are currently 189 approved funds across various categories, like equity and local funds. This provides better diversification options for EPF members in India who are seeking potentially higher returns than the base EPF interest rate.
Increased Equity Allocation: EPFO (Employee’s Provident Fund Organization) recently announced its plans to increase its equity allocation to 15% of the total corpus. This shift aims to potentially generate higher returns for subscribers in the long run. It does not correspond to specific investment decisions, but it does indicate an emphasis on the possibility of raising total returns within the EPF structure.
Interest Rate for EPF: For the fiscal year 2023-2024 (FY24), the EPFO declared an interest rate of 8.25%. Every year, this interest is credited directly into your EPF account.
Key Points: Although EPF MIS provides greater control, it is important to be aware of the risks. Unit trust funds are vulnerable to changes in the market, in contrast to the guaranteed returns of the base EPF. You can carefully examine and make a decision on the available funds and select one that fits your investing objectives and risk tolerance.
LIC or EPF? Here’s the head-to-head comparison!
| Feature | EPF | LIC |
| Investment Type | Fixed Deposit | Traditional Plans & ULIPs |
| Primary Purpose | Retirement Savings | Life Insurance & Savings/Investment |
| Returns | Fixed Interest Rate (currently 8.25% for FY24) | Guaranteed Sum + Bonus (Traditional) or Market-Linked Returns (ULIPs) |
| Risk | Low | Low (Traditional) or Market Risk (ULIPs) |
| Liquidity | Limited (Partial withdrawal after 5 years, full withdrawal at retirement) | Surrender Charges apply (they vary by plan & duration) |
| Tax Benefits | EEE (Exempt-Exempt-Exempt): Investment, Interest, and Maturity are tax-free | Tax benefits vary by plan; generally, partial tax exemptions |
| Investment Choice | No individual choice | wide range of plans with varying features and benefits |
| Life Insurance coverage | No | Yes (Traditional Plans) |
| Management | Government Body (EPFO) | Private Company (LIC) |
| Recent Developments | Increased Equity Allocation (potential for higher returns) | Focus on Social Responsibility & Sustainable Practices |
| Additional Investment Option | EPF MIS (investment in Unit Trust Funds with market risk) | Not applicable |
To Summarise
LIC and EPF are the top choices made by working professionals in India, both in the private and government sectors. LIC provides investment options in the form of traditional and unit-linked plans. Whereas, the EPFO provides a fixed income investment opportunity, with up to 8.25% interest for this year. But investing in EPF will be a better choice as the returns are credited directly into your account by the end of each fiscal year.
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FAQs
Which offers higher returns, LIC or EPF?
While LIC offers guaranteed returns with traditional plans or market-linked returns with ULIPs, EPF offers a fixed interest rate (currently 8.25% for FY24). ULIPs can offer higher returns, but they also come with higher market risk.
I’m young and have a high-risk tolerance. Which option suits me better?
LIC’s ULIPs might be the best option for you. They allow you to invest in the stock market, which can earn you higher returns compared to traditional plans or EPFs.
Which offers greater flexibility in accessing funds?
Liquidity in EPF is restricted. Once certain requirements are satisfied, partial withdrawals are permitted; full withdrawals typically occur upon retirement. Surrender charges apply to LIC plans in the event that early withdrawals are made. In general, LIC offers greater flexibility than EPF.
What are the tax benefits?
The benefit of being an EEE (Exempt-Exempt-Exempt) is enjoyed by the EPF. In other words, there are no taxes associated with your investment, interest, or maturity value. LIC plans provide different tax advantages for the plan selected by you.
