For any retail investor, one of the most important financial goals is to save for retirement. Effective retirement planning entails investing in one of the popular retirement plans, such as the National Pension System.
Investing in NPS is recommended for retail investors who are looking for safe investment options. Another unique characteristic of NPS is the flexibility it offers.
There are multiple investment options for NPS subscribers as they can determine their allocation to different asset classes such as equity, government securities, corporate debt, and alternative investment fund (REITs and InvITs).
Investment choices
There are broadly two investment choices for NPS subscribers: active choice and auto choice.
Active choice: Under active choice, investors can invest up to 75% in equity (which is the maximum), whereas the maximum cap for an alternative investment fund is 5%. The maximum for debt instruments is 100%. Therefore, if you want to play a risky game, you could choose 75% in equity under the active choice.
Auto choice: The auto choice provides four different options: low, moderate, high, and aggressive. As the name suggests, there are four different variants based on the risk appetite of investors. So, as an aggressive investor, you may want to go for an aggressive option.
Under this option, subscribers’ contribution is invested with the equity exposure of 50% until they reach 45 years and the equity allocation tapers subsequently till it reaches 35% at the age of 55 years, which continues till exit.
Choice of pension fund manager
After deciding on the investment choice, one can choose the pension fund manager among the different options available. These include Aditya Birla pension fund, Axis pension fund, DSP, HDFC, ICICI, Kotak, LIC, SBI, Tata, and UTI.
Their past returns on equity investment can be seen as an objective indicator of their performance.
(Three-year returns as on 6 January 2026)
As one can see in the table above, the past three-year returns on equity investment vary widely between 14-18 percent per annum.
The top performing pension fund managers are Tata (18.17%) and Kotak (17.72%). Other pension funds which have delivered high returns include UTI (17.62%) and Aditya Birla (16.33%).
To sum up, investors who are saving for their retirement can make the following investment choices: a) Under an active choice, invest 75% in equity. b) Under auto choice, choose the aggressive variant. c) Opt for a pension fund manager which tends to deliver high performance in return on equity.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment-related decision.
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