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Regulated by the Pension Fund Regulatory and Development Authority of India, the National Pension System is a financial tool that ensures high returns on investments. The scheme was introduced to aid subscribers financially after their retirement. A subscriber can invest in various asset classes like equity, corporate bonds, government bonds and alternate assets.
Further, the NPS returns depend on the fund managers who allocate your assets. Currently, there are eight pension fund managers in India. To understand the NPS return rate in detail, we present this article by collecting information from multiple sources.
Without any further ado, let’s begin!
The expected rate of return on NPS investment depends on the fund’s performance. A scheme’s market performance will throw some light on the NPS average return. The earlier a subscriber invests in NPS; there is the increased chance of obtaining a higher retirement corpus.
Additionally, the NPS rate of return is the interest earned on the contributions made towards the account. As of 2021, the interest rates are between 9%-12%, thereby making this investment a lucrative option for individuals who want to secure their finances for the future. Interest rates applicable on a subscriber’s investment depend on the chosen asset class and amount of contribution.
Also, the expected returns on an NPS investment are market-linked as they are invested on debts and equities. In the following section, you will find the details of NPS return rates as of 2021 and the previous years.
Here is a table on the NPS Tier-I returns on the corporate, alternate assets, government and equity asset classes, respectively, for 1-year, 5-year and 10-year returns.
|
1-year |
5-year |
10-year |
|
12.46%-14.47% |
9.27%-10.15% |
10.05%-10.64% |
|
3.98%-16.73% |
NA |
NA |
|
12.95%-14.26% |
10.29%-10.88% |
9.57%-10.05% |
|
15.33%-18.81% |
13.11%-15.72% |
10.45%-10.86% |
Additionally, NPS Tier-II return rates on corporate, government, and equity asset classes as of 15th January 2021, for 1, 5 and 10-year are explained in the following table.
|
1-year |
5-year |
10-year |
|
12.71%-16.36% |
9.55%-10.17% |
9.86%-10.60% |
|
12.61%-13.42% |
10.40%-12.00% |
9.59%-10.07% |
|
15.19%-17.92% |
13.05%-15.83% |
10.35%-10.58% |
[2]
Apart from this, let’s look at some top-performing NPS funds and their respective return rates in 2021.
|
Pension Fund Managers |
3-year |
5-year |
|
SBI Pension Fund |
11.29% |
9.93% |
|
UTI Retirement Solutions |
11.29% |
10.07% |
|
LIC Pension Fund |
11.28% |
9.93% |
|
Pension Fund Managers |
3-year |
5-year |
|
SBI Pension Fund |
11.31% |
9.92% |
|
LIC Pension Fund |
11.17% |
9.85% |
|
LIC Pension FundUTI Retirement Solutions |
11.25% |
9.98% |
|
Pension Fund Manager |
Term |
Returns |
|
UTI Retirement Solutions |
1-year |
58.07% |
|
HDFC Pension Fund |
3-year |
14.26% |
|
UTI Retirement Solutions |
5-year |
14.03% |
|
Pension Fund Manager |
Term |
Returns |
|
UTI Retirement Solutions |
1-year |
59.65% |
|
HDFC Pension Fund |
3-year |
14.16% |
|
UTI Retirement Solutions |
5-year |
14.36% |
[6]
Other than this, it is crucial to know about the NPS return rates of the past two years to estimate the expected returns.
|
Fund |
3-year |
5-year |
|
HDFC |
10.07% |
13.56% |
|
LIC |
6.99% |
10.76% |
|
ICICI |
9.07% |
12.27% |
|
Kotak |
8.11% |
12.28% |
|
Reliance |
8.82% |
8.08% |
|
UTI |
8.52% |
12.36% |
|
SBI |
8.82% |
12.26% |
|
Fund |
3-year |
5-year |
|
LIC |
10.10% |
9.87% |
|
ICICI |
9.93% |
9.99% |
|
UTI |
9.53% |
9.64% |
|
HDFC |
10.30% |
10.20% |
|
SBI |
10.07% |
9.97% |
|
Kotak |
8.86% |
9.32% |
|
Fund |
3-year |
5-year |
|
HDFC |
11.43% |
10.79% |
|
LIC |
12.24% |
11.71% |
|
ICICI |
10.96% |
10.56% |
|
Kotak |
10.97% |
10.71% |
|
UTI |
10.69% |
10.17% |
|
SBI |
11.08% |
10.71% |
|
Fund |
1-year |
|
LIC |
10.46% |
|
ICICI |
11.59% |
|
UTI |
7.56% |
|
Relience |
7.60% |
|
HDFC |
11.84% |
|
SBI |
10.44% |
|
Birla |
7.53% |
|
Kotak |
12.12% |
|
Fund |
3-year |
5-year |
|
HDFC |
11.17% |
9.54% |
|
LIC |
8.21% |
7.18% |
|
Birla |
NA |
NA |
|
ICICI |
9.62% |
8.76% |
|
Kotak |
9.73% |
8.86% |
|
Reliance |
8.71% |
8.02% |
|
UTI |
9.90% |
9.57% |
|
SBI |
9.82% |
8.99% |
|
Fund |
3-year |
5-year |
|
LIC |
8.42% |
9.54% |
|
ICICI |
9.18% |
10.61% |
|
UTI |
8.68% |
9.99% |
|
Reliance |
8.35% |
9.77% |
|
HDFC |
9.12% |
9.48% |
|
SBI |
8.86% |
10.18% |
|
Birla |
NA |
NA |
|
Kotak |
9.04% |
10.13% |
|
Fund |
3-year |
5-year |
|
HDFC |
9.95% |
11.25% |
|
LIC |
12.39% |
12.60% |
|
Birla |
NA |
NA |
|
ICICI |
10.09% |
11.47% |
|
Kotak |
9.66% |
11.20% |
|
Reliance |
9.25% |
11.02% |
|
UTI |
9.67% |
11.16% |
|
SBI |
9.91% |
11.41% |
[13]
Furthermore, the Scheme E NPS Tier-I account has given an average 1-year return rate of 13.20% in 2020. The fund manager HDFC Pension Management has been the top performer with 14.87% returns in Scheme E. Also, Scheme G generated 14.72% returns for an average 1-year term.
In addition to this, Government bonds or securities performed well with double-digit returns over the year.
The investments on the National Pension System depend on markets as subscribers invest in equities and debts. Therefore, the returns on such investments are affected by market fluctuations and are not fixed.
Further, the amount of return is dependent on the NPS performance. Therefore, investors need to choose wisely before fixating on a particular fund manager. A desirable manager will allocate an investor’s assets across the market in such a manner so that the returns are high.
Whether or not an individual can afford the risk, he can invest in government securities, equity and corporate bonds as per his preference.
Now let’s see how one can check the NPS fund performance.
After doing thorough research, one can select an NPS fund that generates decent returns. The past performance of a fund is crucial to consider as it gives an insight into how the fund performed in various market scenarios.
Moreover, an investor can visit the official website of NSDL and search for a fund with a high Net Asset Value which has been a top performer in recent years. Some examples of such funds are HDFC Pension Fund, UTI Retirement Solution and more.
As the returns on NPS equity funds entirely depend on market fluctuations, it generates negative NPS on a short-term basis. However, long-term investments can generate high returns.
Therefore, from the aforementioned piece on NPS returns, it is evident that a fund’s performance and the experience of a fund manager is a determining factor in estimating the rate of returns.
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