Retirement goals: If you are planning to invest in the National Pension System (NPS), you could choose a pension fund manager (PFM) of your choice. There are 10 such PFMs to choose from.
Here we list out the past three years’ returns on equity (Tier I) assets delivered by them. All these pension fund managers have reported past returns in the range of 13 to 16% per annum on their equity investments.
The highest returns were delivered by Kotak Mahindra Pension Fund, Tata Pension Fund Management, and UTI Pension Fund, as shown in the table below.
(Source: npstrust.org.in; returns as of 12 December)
As the table above shows, the lowest returns (in the past three years) were delivered by SBI Pension Fund and Axis Pension Fund.
Notably, NPS subscribers have the flexibility to select a scheme and a pension fund at both the corporate and the subscriber levels. The companies may opt for a pension fund and investment choice or even leave the option to employees. And once selected, the pension fund can be changed once in a financial year.
From equity to debt
Pension fund managers invest the NPS corpus in various assets. These assets are equity (indicated as ‘E’), corporate debt (C), government bonds (G) and alternative investment funds (A). Subscribers can hold two different accounts under NPS: Tier I and Tier II. While Tier I is a compulsory account, Tier II is optional.
For the uninitiated, NPS offers two different approaches to invest subscribers’ money.
Active choice: In this, individuals decide on the asset classes in which the contributed funds are to be invested, as well as their allocations (Asset Class E, Asset Class C, Asset Class G and Asset Class A).
Auto choice: Here, subscribers have the choice of three lifecycle funds, i.e., Aggressive Life Cycle Fund (LC75), Moderate Life Cycle Fund (LC50) and Conservative Life Cycle Fund (LC25). Under lifecycle funds, investment management is performed automatically based on the age of the subscriber.
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