It depends mostly on whether you value the lock-in or the flexibility more: NPS keeps the money for retirement, while mutual funds leave it free for anything.
NPS is built for retirement. Money stays invested until 60, costs are low, and you choose how much goes into equity. At exit, rules changed in December 2025: most non-government subscribers can now take up to 80% as a lump sum, and at least 20% must buy an annuity, which pays a monthly pension. Small balances can be withdrawn in full. The annuity part is where NPS gives up flexibility.
Mutual funds have no lock-in for most schemes and no required annuity. That freedom is useful, but it also makes it easy to dip into retirement money for other goals.
A simple way to split it:
- If you would be tempted to use the money early, the NPS lock-in protects you from yourself.
- If your employer offers NPS as part of your pay, that contribution can be tax efficient and is often worth taking.
- Keep money for goals before retirement, such as a child's education, in mutual funds, not NPS.
Our NPS calculator shows the lump sum and pension a monthly contribution could build.
Your own answer depends on your tax regime, your employer's offer and how disciplined you are with savings. If you want someone to look at your numbers, you can book a free call.