NPS Returns for Tier I & Tier II Accounts

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!

What Is the Return on NPS?

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.

NPS Return Rates as of January 2021

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%

[1]

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.

Central Government Scheme as of May 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%

[3]

State Government Schemes as of May 2021

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%

[4]

Tier-I Equity Funds Return for Scheme E as of September 2021

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%

[5]

Tier-II Equity Funds Return for Scheme E as of September 2021

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.

NPS Tier-I Scheme E returns as of December 2020

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%

[7]

Scheme C NPS Tier-I Returns as of December 2020

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%

[8]

NPS Tier-I Scheme G Returns as of December 2020

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%

[9]

Alternate Assets Returns for NPS Tier-I as of July 2019

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%

[10]

Equity Returns for NPS Tier-II as of July 2019

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%

[11]

NPS Tier-II Corporate Bond Returns as of July 2019

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%

[12]

Government Bonds Return for NPS Tier-II as of July 2019

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.

Are NPS Returns Fixed?

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.

Checking 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.

Can NPS be Negative?

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.

Frequently Asked Questions

✓ Is there a guaranteed return on NPS?

No. There are no fixed returns on NPS as it depends on the pension fund managers and the scheme you choose.

✓ Can I calculate my provisional pension on maturity beforehand?

Yes. You can use an NPS pension calculator available online to calculate your estimated lump sum pension amount.

✓ Is there any tax on NPS returns?

There is no tax on your NPS returns as long as you do not opt for a premature exit. In case you withdraw your pension before maturity, you will be liable to withdraw 20% of the corpus, which will be taxed as per the tax slab rate.