The stock market has been in turmoil in the last few months. Many investors are seeing their returns from equity being eroded or at worse being negative. However, this one NPS pension fund has given more than 14.82% returns in Tier I equity in the last year. Other Tier I equity schemes of NPS are showing very abysmal returns for the same period.
According to the NPS Trust website, DSP has offered 14.82% in the Equity Tier I scheme in the last year. On the other hand, other NPS equity schemes are not able to cross 5% return in one year. SBI NPS equity scheme has delivered -2.79%, and Max Life has given -0.06%. UTI Pension Fund’s equity scheme has delivered 3.66%, and Kotak Pension Fund’s equity scheme has delivered 3.52% return in the last year. Aditya Birla Equity Pension Fund has given a 1.01% return in the last year.
The returns are as of March 12, 2025, as per the NPS Trust website.
Also read: Income tax benefits of NPS under both old and new tax regime for government and private sector employees
What is the National Pension System?
The National Pension System (NPS) is a government-regulated, defined contribution pension scheme that allows individuals to build a retirement corpus. It is managed by the Pension Fund Regulatory and Development Authority (PFRDA). Individuals can contribute at their discretion. However, individuals must make a minimum contribution every year to ensure their Tier I NPS account is active. Once the individual reaches retirement, the accumulated corpus is used to generate a steady post-retirement income.
NPS contributions offer tax deductions under Sections 80CCD (1), 80CCD (1B) and 80CCD (2) of the Income Tax Act. The deductions will depend on the tax regimes opted for by an individual in the financial year.NSC vs bank FDs: Which is a better tax saving option?At the time of NPS account maturity, 60% of the lump sum withdrawals are tax-exempt. The balance of 40% has to be mandatorily used to buy annuity from life insurance companies.
Investment Choices Under NPS
NPS allows two types of investment approaches to the investors”
A. Active Choice: The investor has control over asset allocation among Equity (E), Corporate Bonds (C), Government Securities (G), and Alternative Investments (A).
Equity investments are capped at 75% of the total contribution.
Investors can allocate up to 100% in Corporate Bonds and Government Securities. The maximum contribution to Alternative Investment is capped at 5%.
B. Auto Choice: The allocation is age-based and automatically adjusted as an individual’s age changes.
Higher equity exposure in younger years and gradual shift to safer assets (bonds and government securities) as the investor approaches retirement.
This option is suitable for those who do not wish to actively manage their investments and are risk averse.
How are NPS contributions invested?
The funds contributed to NPS are invested in different asset classes as per PFRDA guidelines. The primary asset classes include:
Asset Class E (Equity): Invests in stocks of companies that are traded in the Futures and Options (F&O) segment.
Asset Class C (Corporate Bonds): Invests in highly rated (minimum ‘A’ rating) corporate bonds and debentures.
Asset Class G (Government Securities): Invests in sovereign bonds, state development loans, and other government-backed instruments.
Asset Class A (Alternative Assets): Invests in infrastructure trusts, REITs, and other alternative investment vehicles.
The performance of NPS investments largely depends on the allocation mix among these asset classes.
How to track NPS performance?
Subscribers can track their investments through:
Online NPS portal login (via CRA – Central Recordkeeping Agency)
Mobile app for NPS account management
Periodic email statements will be sent to the registered email ID and Annual physical statements sent to the subscriber’s address.
This transparency ensures that investors can monitor how their pension funds are performing over time.
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