The Government of India rolled out the National Pension Scheme (NPS) for all the citizens of India way back on 1st May 2009, and for corporate sector from December 2011. Since then, NPS has become one of the most popular investment and tax saving options in India.
The numbers speak for themselves – The Total assets under management (AUM) with NPS is now at Rs. 8.82 Lakh crore with Y-o-Y growth of 23.45%. The number of subscribers under various schemes under the National Pension System (NPS) rose to 624.81 lakh as at March 4th 2023 from 508.47 Lakh in March 2022 showing a year- on- year (Y-o-Y) increase of 22.88%.
The pension scheme gives its investors a choice to select the funds automatically or manually. While the active choice will allow you to determine the plan and percentage of your funds you wish to invest in, the auto choice will allocate your investments based on the risk assessment and your profile.
In this post let’s understand – What are the different types of funds or asset classes under NPS? How many fund managers are currently managing the NPS schemes? Which are the top performing NPS Schemes 2023? Which are the best NPS Schemes to invest in 2024 & beyond? Which NPS Scheme has given the highest return? Who are the best NPS Fund managers in India?
Types of NPS Funds, Scheme Preferences & Fund Managers
National Pension System (NPS)offers two types of accounts – Tier Iand Tier II.
| NPS Tier – I Account | NPS Tier – II Account |
|---|---|
| Individual Pension Account | Optional Account and requires an active Tier-I Account |
| Withdrawal as per Exit & Withdrawal rules and regulations | Unrestricted withdrawals |
| Minimum contribution to open is Rs.500/- | Min. Contribution to open is Rs.250/- |
| Min. Contribution per year is Rs.1000/- | There’s no restriction on min. Contribution per year |
| AMC charges applicable | No separate AMC charges applicable |
| Switching to Tier-II is restricted subject to Exit & Withdrawal regulations | Anytime switching to Tier-I allowed |
Income Tax benefits are available on Tier-1 deposits only. The returns on your NPS investments whether in Tier 1 or Tier 2, are primarily dependent on the type of Fund(s) and Pension Fund manager that who have chosen to invest. So, you need to know and understand the different types of NPS Funds.
Below mentioned four fund categories / Investment options (also known as asset classes) are available under National Pension System:
- Equity Fund (E)
- Government Securities Fund(G)
- Corporate Fixed Income Instruments other than Govt. Securities (C)
- Alternative Investments (available only in Tier-1)
The money invested in NPS is managed by PFRDA-registered Pension Fund Managers. At the moment, there are ten NPS pension fund managers:
- Aditya Birla Sun Life Pension Management Ltd.
- Axis Pension Fund Management Limited
- HDFC Pension Management Co. Ltd.
- ICICI Pru. Pension Fund Mgmt Co. Ltd.
- Kotak Mahindra Pension Fund Ltd.
- LIC Pension Fund Ltd.
- Max Life Pension Fund Management Limited
- SBI Pension Funds Pvt. Ltd
- Tata Pension Management Ltd. &
- UTI Retirement Solutions Ltd.
The govt employees’ NPS accounts and contributions are currently managed equally by three fund managers namely – LIC Pension Fund, SBI Pension Fund and UTI. Under this category, do note that up to 50% of corpus only can be invested in Equity fund. The rest of the corpus is allocated to Corporate Bonds and Govt securities.
The pvt (corporate) sector employees and other individuals can also invest in NPS. The Equity fund threshold limit is set at 75%. These individuals can select any of the two investment options to select scheme preferences.
- Active choice – Under this option, subscriber selects the allocation pattern amongst the three funds E, C and G. The Maximum allocation to Equity can be 75% and 100% in Corporate or Govt securities. (However, there is a clause of tapering of the equity allocation after the age of 60 years.)
| Asset Class / Fund Choice | Maximum allocation of investment in the asset class |
|---|---|
| E (Equity Fund) | Up to 75% till Age 60 Up to 50% Age 60 & above |
| C (Corporate Fixed Income) | Up to 100% |
| G (Govt Securities) | Up to 100% |
| A (Alternate Investments) | Up to 5% . (Available only for NPS Tier 1 account) |
- Auto Choice : Under this option, subscriber funds are automatically allocated amongst three funds E, C and G in a pre-defined portfolio pattern prescribed by PFRDA. When a subscriber chooses this option, it adopts a lifecycle-based approach, in which the allocation to different asset classes changes gradually as the person’s age increases.
- Under Auto choice, you will be given three types of funds to choose from –
- Moderate Life Cycle Fund (default option) – The “Moderate Life Cycle Fund” option provides you with the option of a Life Cycle fund with a reasonable risk profile, where the maximum equity allocation is kept at 50% up to the age of 35 years.
- Aggressive Life Cycle Fund – For “Aggressive Life Cycle Fund” maximum equity allocation is kept at 75% up to the age of 35 years.
- Conservative Life Cycle Fund – for “Conservative Life Cycle Fund” maximum equity allocation is kept at 25% up to the age of 35 years.
NPS allows you to change your fund manager once a year and your scheme of investment four times a year. The shift is allowed for investments in NPS Tier I (non-government subscribers only) and NPS Tier II accounts.
Top Performing NPS Schemes 2023 – Best NPS Funds 2024 – Best NPS Fund Returns
Below are the best NPS Funds to invest in 2024 & beyond;
Best NPS Fund Returns – Central Govt Scheme
| Pension Fund | Inception Date | AUM (Rs Crs) | Returns 1 Year | Returns 3 Years | Returns 5 Years | Returns 7 Years | Returns 10 Years | Returns Inception |
|---|---|---|---|---|---|---|---|---|
| LIC Pension Fund Ltd. | 1-Apr-08 | 90,303.54 | 9.64% | 7.87% | 9.38% | 8.04% | 9.81% | 9.35% |
| SBI Pension Funds Pvt. Ltd | 1-Apr-08 | 96,230.00 | 9.45% | 7.44% | 9.35% | 8.04% | 9.79% | 9.54% |
| UTI Retirement Solutions Ltd. | 1-Apr-08 | 89,951.50 | 9.38% | 7.69% | 9.32% | 8.07% | 9.77% | 9.31% |
- The contributions to NPS Accounts by Central govt employees are currently equally managed by the three pension fund managers.
- Under Central Govt Scheme, the equity exposure typically ranges from 8% to 15% of a fund’s portfolio.
- The best NPS Fund manager based on the returns generated in the last 10 years is LIC Pension Fund. This fund has generated returns of around 9.81%.
- In terms of Assets under management, SBI Pension Fund is the biggest one with Assets of around Rs 96,200 cr.
Best NPS Fund Manager 2023 – State Govt Scheme
| Pension Fund | Inception Date | AUM (Rs Crs) | Returns 1 Year | Returns 3 Years | Returns 5 Years | Returns 7 Years | Returns 10 Years | Returns Inception |
|---|---|---|---|---|---|---|---|---|
| LIC Pension Fund Ltd. | 25-Jun-09 | 167,825.58 | 9.54% | 7.77% | 9.33% | 7.96% | 9.78% | 9.30% |
| SBI Pension Funds Pvt. Ltd | 25-Jun-09 | 172,412.62 | 9.35% | 7.32% | 9.33% | 7.97% | 9.85% | 9.22% |
| UTI Retirement Solutions Ltd. | 25-Jun-09 | 163,040.19 | 9.37% | 7.66% | 9.31% | 8.00% | 9.75% | 9.25% |
- The best NPS Fund manager based on the returns generated in the last 10 years is SBI Pension Fund. This fund has generated returns of around 9.85%.
- In terms of Assets under management, SBI Pension Fund is the biggest one with Assets of around Rs 1,70,000 cr.
Top Performing NPS Tier-I Equity Fund Manager 2023
| Pension Fund | Inception Date | AUM (Rs Crs) | Subscribers | Returns 1 Year | Returns 3 Years | Returns 5 Years | Returns 7 Years | Returns 10 Years | Returns Inception |
|---|---|---|---|---|---|---|---|---|---|
| Aditya Birla Sun Life | 9-May-17 | 414.65 | 43,436 | 18.85% | 20.92% | 13.09% | NA | NA | 12.78% |
| Axis Pension Fund | 21-Oct-22 | 241.91 | 27,562 | NA | NA | NA | NA | NA | 10.38% |
| HDFC Pension | 1-Aug-13 | 26,189.86 | 1,713,869 | 17.76% | 21.98% | 13.83% | 13.73% | 14.40% | 14.60% |
| ICICI Pru. Pension Fund | 18-May-09 | 8,306.01 | 641,839 | 20.25% | 23.03% | 13.68% | 13.25% | 14.12% | 12.41% |
| Kotak Mahindra | 15-May-09 | 1,462.89 | 99,055 | 19.92% | 22.65% | 14.13% | 12.98% | 14.12% | 11.82% |
| LIC Pension Fund | 23-Jul-13 | 4,066.88 | 384,140 | 18.73% | 23.28% | 13.06% | 12.32% | 12.96% | 12.78% |
| Max Life Pension | 12-Sep-22 | 124.75 | 7,772 | 18.19% | NA | NA | NA | NA | 8.18% |
| SBI Pension Funds | 15-May-09 | 13,373.32 | 1,484,740 | 18.89% | 21.60% | 12.77% | 12.59% | 13.59% | 10.89% |
| Tata Pension Management | 19-Aug-22 | 86.42 | 15,025 | 16.92% | NA | NA | NA | NA | 12.78% |
| UTI Retirement Solutions | 21-May-09 | 1,762.92 | 116,988 | 17.94% | 22.27% | 13.04% | 12.82% | 13.97% | 12.17% |
| Benchmark Return as on 28.09.2023 | 15.24% | 22.51% | 14.00% | 13.81% | 14.55% | ||||
- The best performing NPS Pension Fund manager under NPS Tier-1 Equity Plan is HDFC Pension Fund. This scheme has generated returns of around 14.4% and in the last 10 years.
- The HDFC Pension fund – Equity plan has picked Financials as the top sector. The top 5 holdings of this fund are HDFC Bank, ICICI Bank, Reliance Industries, Infosys and Axis Bank.
- The HDFC Pension Fund – Equity Plan has been faring well based on the parameters of Returns, Downside risk and Consistency.
- The Equity plan offered by the HDFC Pension Fund has the highest AUM and subscribers.
- The benchmark used for Equity plans is CNX Nifty 50 Index.
Best NPS Fund Tier-1 under Scheme-G Category (Govt Securities / Bonds)
| Pension Fund | Inception Date | AUM (Rs Crs) | Subscribers | Returns 1 Year | Returns 3 Years | Returns 5 Years | Returns 7 Years | Returns 10 Years | Returns Inception |
|---|---|---|---|---|---|---|---|---|---|
| Aditya Birla Sun Life | 9-May-17 | 355.41 | 42,705 | 8.26% | 5.20% | 9.01% | NA | NA | 7.66% |
| Axis Pension Fund | 21-Oct-22 | 237.48 | 27,332 | NA | NA | NA | NA | NA | 7.08% |
| HDFC Pension | 1-Aug-13 | 18816.27 | 1,681,340 | 8.09% | 4.92% | 9.06% | 7.21% | 9.26% | 8.95% |
| ICICI Pru. | 18-May-09 | 7018.84 | 631,891 | 8.18% | 4.95% | 8.81% | 7.08% | 9.36% | 8.42% |
| Kotak Mahindra | 15-May-09 | 1085.54 | 96,528 | 8.17% | 5.12% | 9.03% | 7.14% | 9.36% | 8.41% |
| LIC | 23-Jul-13 | 4349.77 | 391,670 | 8.15% | 5.15% | 9.52% | 7.98% | 9.79% | 9.75% |
| Max Life | 12-Sep-22 | 197.98 | 11,485 | 8.10% | NA | NA | NA | NA | 8.23% |
| SBI Pension | 15-May-09 | 14473.25 | 1,484,698 | 8.33% | 4.95% | 8.89% | 7.19% | 9.40% | 9.00% |
| Tata Pension | 19-Aug-22 | 69.31 | 15,029 | 8.16% | NA | NA | NA | NA | 7.43% |
| UTI | 21-May-09 | 1500.1 | 113,030 | 8.42% | 5.00% | 8.74% | 6.91% | 9.14% | 8.17% |
| Benchmark Return as on 28.09.2023 | 8.70% | 4.54% | 8.52% | 6.69% | 8.86% | ||||
- The Government Bond Plan offered by LIC Pension fund has clocked returns of around 9.79% during the last 5 years. The average benchmark return for the same period is 8.86%.
- SBI Pension fund Scheme G Plan has also been performing well.
Top Performing NPS Fund Manager – NPS Tier 1 Funds – Corporate Debt Plans (Scheme C)
| Pension Fund | Inception Date | AUM (Rs Crs) | Subscribers | Returns 1 Year | Returns 3 Years | Returns 5 Years | Returns 7 Years | Returns 10 Years | Returns Inception |
|---|---|---|---|---|---|---|---|---|---|
| Aditya Birla | 9-May-17 | 210.43 | 43,028 | 7.88% | 5.85% | 8.83% | NA | NA | 8.29% |
| Axis | 21-Oct-22 | 136.53 | 27,287 | NA | NA | NA | NA | NA | 6.73% |
| HDFC | 1-Aug-13 | 11267.83 | 1,687,290 | 7.88% | 6.23% | 9.05% | 7.86% | 9.29% | 9.32% |
| ICICI Pru. | 18-May-09 | 4179.03 | 635,867 | 7.97% | 5.94% | 8.54% | 7.59% | 9.28% | 9.61% |
| Kotak Mahindra | 15-May-09 | 636.03 | 97,062 | 7.71% | 5.76% | 7.94% | 6.99% | 8.80% | 9.29% |
| LIC | 23-Jul-13 | 2379.31 | 383,096 | 7.74% | 5.75% | 8.71% | 7.46% | 8.98% | 9.06% |
| Max Life | 12-Sep-22 | 85.23 | 7,757 | 6.89% | NA | NA | NA | NA | 6.67% |
| SBI | 15-May-09 | 7081.69 | 1,474,714 | 7.72% | 5.86% | 8.61% | 7.58% | 9.10% | 9.63% |
| Tata | 19-Aug-22 | 39.68 | 14,820 | 6.18% | NA | NA | NA | NA | 5.81% |
| UTI | 21-May-09 | 824.92 | 115,604 | 8.04% | 5.61% | 8.32% | 7.24% | 8.82% | 8.72% |
| Benchmark Return as on 28.09.2023 | 7.77% | 6.37% | 9.29% | 7.77% | 9.46% | ||||
- The highest returns generated in the last 10 years by NPS Funds under Corporate Fixed Income Plans are managed by ICICI Prudential & HDFC Fund Managers.
- The HDFC Pension Fund – Corporate Debt Scheme has also been performing well, based on the parameters of Returns, (better) Downside risk and Consistency.
- HDFC Pension Fund has the highest AUM of around Rs 11,000 cr.
Best NPS Pension Fund Returns – Tier II Account – Equity Plan (E)
| Pension Fund | Inception Date | AUM (Rs Crs) | Subscribers | Returns 1 Year | Returns 3 Years | Returns 5 Years | Returns 7 Years | Returns 10 Years | Returns Inception |
|---|---|---|---|---|---|---|---|---|---|
| Aditya Birla | 9-May-17 | 27.36 | 12,192 | 18.92% | 21.12% | 13.13% | NA | NA | 12.76% |
| Axis | 21-Oct-22 | 3.42 | 2,842 | NA | NA | NA | NA | NA | 10.64% |
| HDFC | 1-Aug-13 | 932.06 | 226,624 | 17.89% | 21.97% | 13.84% | 13.72% | 13.01% | 12.96% |
| ICICI Pru. | 21-Dec-09 | 318.84 | 81,721 | 20.94% | 23.24% | 13.88% | 13.40% | 14.21% | 11.12% |
| Kotak Mahindra | 14-Dec-09 | 94.48 | 22,986 | 20.03% | 22.50% | 13.97% | 12.89% | 13.98% | 11.31% |
| LIC | 12-Aug-13 | 130.24 | 63,031 | 18.30% | 23.40% | 13.12% | 12.21% | 10.97% | 10.88% |
| Max Life | 12-Sep-22 | 0.63 | 680 | 18.79% | NA | NA | NA | NA | 14.86% |
| SBI | 14-Dec-09 | 438.32 | 197,017 | 18.84% | 21.74% | 12.82% | 12.63% | 13.66% | 10.75% |
| Tata | 19-Aug-22 | 6.43 | 4,223 | 17.75% | NA | NA | NA | NA | 12.68% |
| UTI | 14-Dec-09 | 78.11 | 24,066 | 18.08% | 22.36% | 13.07% | 13.13% | 14.25% | 11.06% |
| Benchmark Return as on 28.09.2023 | 15.24% | 22.51% | 14.00% | 13.81% | 14.55% | ||||
- The Equity Scheme offered by UTI Retirement has generated returns of around 14.25% during the last 10 years. The fund’s portfolio has ‘financials’ sector with highest exposure, followed by the Energy & Technology sectors. The top five holdings of this fund are Hdfc Bank, Icici Bank, Reliance Industries, Infosys Tech & Larsen & Tourbo.
- None of the funds have been able to beat their benchmark index return over the last 5-to-10-year periods.
- HDFC Pension Fund has the highest AUM of around Rs 900 cr.
Best NPS Pension Fund Returns – Tier II Account – Govt Bond Plans (G)
| Pension Fund | Inception Date | AUM (Rs Crs) | Subscribers | Returns 1 Year | Returns 3 Years | Returns 5 Years | Returns 7 Years | Returns 10 Years | Returns Inception |
|---|---|---|---|---|---|---|---|---|---|
| Aditya Birla | 9-May-17 | 22.63 | 11,914 | 8.17% | 5.20% | 8.94% | NA | NA | 7.00% |
| Axis | 21-Oct-22 | 1.94 | 2,715 | NA | NA | NA | NA | NA | 5.80% |
| HDFC | 1-Aug-13 | 574.43 | 218,674 | 8.00% | 4.88% | 8.86% | 7.06% | 9.14% | 9.07% |
| ICICI Pru. | 30-Dec-09 | 245.15 | 79,342 | 8.24% | 5.07% | 8.81% | 7.09% | 9.36% | 8.49% |
| Kotak Mahindra | 14-Dec-09 | 63.48 | 22,230 | 7.96% | 5.05% | 8.67% | 6.97% | 9.19% | 8.16% |
| LIC | 12-Aug-13 | 179.26 | 64,792 | 8.23% | 5.27% | 9.77% | 8.20% | 10.03% | 9.99% |
| Max Life | 12-Sep-22 | 0.32 | 645 | 6.96% | NA | NA | NA | NA | 6.83% |
| SBI | 14-Dec-09 | 428.46 | 196,104 | 8.24% | 4.89% | 8.70% | 7.05% | 9.32% | 8.97% |
| Tata | 19-Aug-22 | 4.45 | 4,109 | 8.55% | NA | NA | NA | NA | 8.09% |
| UTI | 14-Dec-09 | 61.24 | 23,649 | 8.31% | 5.00% | 8.77% | 6.95% | 9.22% | 8.73% |
| Benchmark Return as on 28.09.2023 | 8.70% | 4.54% | 8.52% | 6.69% | 8.86% | ||||
- The Tier-II Government Bond Plan offered by LIC Pension fund has clocked returns of around 10% during the last 10 years. The fund is able to beat its benchmark return over the 3-to-10-year period.
- HDFC Pension Fund has the highest AUM of around Rs 570 cr.
Best NPS Tier-II Funds Returns 2020 – Top Performing NPS Fund Manager Corporate Debt Plans (Scheme C)
| Pension Fund | Inception Date | AUM (Rs Crs) | Subscribers | Returns 1 Year | Returns 3 Years | Returns 5 Years | Returns 7 Years | Returns 10 Years | Returns Inception |
| Aditya Birla | 9-May-17 | 12.23 | 12,067 | 7.76% | 5.94% | 8.55% | NA | NA | 7.68% |
| Axis | 21-Oct-22 | 1.33 | 2,731 | NA | NA | NA | NA | NA | 5.36% |
| HDFC | 1-Aug-13 | 390.63 | 220,825 | 7.86% | 5.92% | 8.80% | 7.75% | 8.57% | 8.59% |
| ICICI Pru. | 21-Dec-09 | 168.22 | 81,099 | 7.92% | 5.85% | 8.44% | 7.49% | 9.17% | 9.43% |
| Kotak Mahindra | 14-Dec-09 | 37.8 | 22,531 | 7.62% | 5.51% | 8.22% | 7.23% | 8.81% | 8.62% |
| LIC | 12-Aug-13 | 72.39 | 63,023 | 7.73% | 6.87% | 9.06% | 7.55% | 8.61% | 8.55% |
| Max Life | 12-Sep-22 | 0.16 | 643 | 6.51% | NA | NA | NA | NA | 6.44% |
| SBI | 14-Dec-09 | 222.86 | 195,816 | 7.49% | 5.35% | 8.13% | 7.23% | 8.85% | 9.17% |
| Tata | 19-Aug-22 | 2.04 | 4,108 | 6.97% | NA | NA | NA | NA | 6.66% |
| UTI | 14-Dec-09 | 32.88 | 23,858 | 7.81% | 5.52% | 8.26% | 7.25% | 8.82% | 8.74% |
| Benchmark Return as on 28.09.2023 | 7.77% | 6.37% | 9.29% | 7.77% | 9.46% | ||||
- The highest returns generated by NPS Funds (Tier -II) under Corporate Fixed Income Plans are managed by ICICI Prudential & HDFC Pension Funds.
Latest NPS Income Tax Benefits FY 2023-24 / AY 2024-25 under Old & New Tax Regimes
Below are the various Income Tax Sections under which an NPS investor can claim Income Tax Deductions for FY 2023-24 / AY 2024-25 .
- Section 80C
- Section 80CCD (1)
- U/S 80CCD (1b)
- Section 80CCD (2)
Under the new tax regime, the first three deductions are not available, but the fourth one continues to be available.
Related article :NPS Income Tax Benefits FY 2023-24 | Under Old & New Tax Regimes
My perspective on NPS:
Unfortunately, majority of the subscribers are not aware of ‘how NPS scheme works’ and invest in it just to save some taxes. Note that NPS does not give you Pension. The subscriber has to re-invest the NPS Withdrawal corpus in an annuity insurance product.
Before you invest in NPS (if planning to invest), kindly understand the features of NPS, tax implications, withdrawal rules & mandatory clause to buy annuity product on maturity and then take a wise decision. If you have already invested in NPS, you may review your investment decision.
I believe that most of the investors opt for the NPS for two main reasons – i) for tax saving purpose & ii) No other choice than to invest as contribution to NPS has been made mandatory for the Govt employees.
Given a choice between NPS and Mutual Funds, I would prefer investing in Mutual Funds to NPS.
Kindly share your views on NPS as an investment choice? Have you invested in NPS? Is NPS your preferred choice for tax saving? Which one do you prefer, NPS or MFs for your long-term retirement planning? Share your views, cheers!
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(Post first published on : 03-Oct-2023)
