NPS: 7 pension fund managers delivered THESE returns on equity investment in past 3 years

Those of you who regularly invest in the National Pension System (NPS) would be aware that it does not deliver fixed, but market-linked, returns.

But the good thing is that investors can choose any pension fund manager (PFM) which s/he wants to.

As of now, there are ten PFMs registered with the Pension Fund Regulatory and Development Authority (PFRDA) for managing the NPS money. Out of these, three were inducted fairly recently. Therefore, if you want to monitor the returns of past 3 years, you would find the data only for seven of these fund managers.

The NPS corpus is invested across different asset classes i.e., government debt, equity, corporate debt and alternative investment funds.

Here, we examine the returns delivered by all seven PFMs on their equity investment in the past three years only. These investments are made in two categories: tier I which is mandatory investment for NPS subscribers and tier II which is voluntary and withdrawals are allowed anytime.

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What are Tier I and Tier II accounts?

For the unversed,  NPS offers two types of accounts: Tier I and Tier II. While the former is mandatory, the latter is a voluntary account linked to an investor’s investment.

The key point of difference between the two accounts is that Tier II provides a greater flexibility by enabling the depositors to withdraw any time they wish to, whereas Tier I account holders do not enjoy this flexibility.

Returns on equity across pension fund managers

Equity (Tier I)

Pension fund managers3-year-returns (%)Aditya Birla PFM         17.01HDFC PFM17.47ICICI PFM18.97Kotak PFM18.90LIC PFM17.28SBI PFM15.76UTI PFM18.61

(Source: npstrust.org.in; returns as on July 21)

As one can see in the table above, the highest return (18.97%) was delivered by ICICI Pension fund manager in the past three years, whereas the lowest return (15.76%) was given by SBI PFM. 

Equity (Tier II)

Pension fund manager3-year-return (%)Aditya Birla                  17.57HDFC PFM17.51ICICI PFM18.83Kotak PFM18.85LIC PFM17.02SBI PFM16.39UTI PFM17.77

(Source: npstrust.org.in; returns as on July 21)

As one can see in the table above, the highest return of 18.85 percent on equity (tier -II) was delivered by Kotak PFM in the past three years whereas SBI PFM delivered the lowest return of 16.39 percent for the corresponding period.

Although we have listed returns only on equity, the NPS portfolio also includes investment in other asset classes such as corporate debt (C), government securities (G) and alternative investment funds (A).

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Now, you can also determine the allocation of your portfolio to different asset classes. As a conservative investor, you can invest your entire contribution to corporate or government debt.

However, if you are a more aggressive investor, you can have some exposure to equity. One can choose to invest upto 50 per cent of the portfolio in ‘E’’ or up to 5 percent in alternative investment funds or ‘A’.

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