Individuals looking for higher returns than fixed deposits can park money in National Pension System ( NPS ) Tier 2 account as it is linked to market instruments. Unlike Tier 1, it has no lock-in period, which makes it a flexible option for short- and medium-term needs.

The NPS Tier 2 account is a voluntary savings account under NPS, where one can invest and withdraw anytime without restrictions. One needs to have a Tier 1 account to have a Tier 2 account.

Over a three-year period, the equity returns of 10 pension funds in NPS Tier 2 range between 14.6% to 18%. For government securities the returns are 6.2% to 6.6%. And for corporate debt, between 8.3% to 8.8%, higher than SBI’s fixed deposit rate of 6.45% for two to less than three-year tenures.

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