NPS fund performance: Here's a snapshot of pension funds' returns in Tier 1 under NPS

NPS performance: The introduction of the Unified Pension System (UPS) by the Centre has prompted scrutiny and the existence of the National Pension System (NPS), which was established in 2004 as an alternative to the Old Pension Scheme and was later expanded to cover all employees in 2009. Starting from the next financial year (April 1, 2025), central government employees will be given the choice to either opt out of the NPS in favor of the UPS or continue with the NPS if they prefer.

NPS is a government-supported contributory pension scheme that is accessible to all individuals aged between 18 and 70 years. The primary objective of the scheme is to aid investors in building a retirement corpus through regular contributions. 

The NPS comprises two types of accounts: Tier I and Tier II. The Tier I account has a lock-in period of 15 years, while the Tier II account functions akin to a savings account. Contributions made to Tier I accounts provide additional tax benefits of up to Rs 50,000 per year, in addition to the overall limit of Rs 1.5 lakh under Section 80C of the Income Tax Act, 1961.

NPS structure

NPS offers a range of Pension Fund Managers (PFMs), investment options (Auto or Active), and four asset classes namely Equity, Corporate Debt, Government Bonds, and Alternative Investment Funds for individuals looking to secure their retirement funds. 

When enrolling in the Central Recordkeeping Agency (CRA) system under NPS, a subscriber must make a deliberate choice of a Pension Fund Manager (PFM) and scheme preference. The selection process involves considering various options available. 

Initially, the subscriber chooses the preferred PFM, and subsequently, after PFM selection, the subscriber can opt for either the Auto or Active investment option. This two-step process allows NPS subscribers to tailor their investment strategy according to their financial goals and risk tolerance.

NPS pension funds

Currently, there are approximately 11 pension funds that have been granted authorization to oversee investments within the National Pension System (NPS). These entities include SBI Pension Funds Pvt Ltd, LIC Pension Fund Ltd, UTI Pension Fund Limited, HDFC Pension Management Co. Ltd, ICICI Prudential Pension Fund Management Co Ltd, Kotak Mahindra Pension Fund Ltd, Aditya Birla Sunlife Pension Management Ltd, Tata Pension Management Private Limited, Max Life Pension Fund Management Ltd, Axis Pension Fund Management Ltd, and DSP Pension Fund Managers Private Limited.

Performance of pension funds

The scheme that demonstrated the most successful performance was the UTI Pension Fund, yielding a remarkable 39.17% return on equity investments within the past year. Following closely behind, Tata Pension Management Pvt Ltd secured the second spot with a return rate of 38.82%. Additionally, ICICI Prudential Pension Fund Management Co Ltd achieved a respectable return rate of 35.39%.