National Pension SystemThe National Pension System (NPS) is slowly gaining momentum with even private sector investors opting for this retirement solution. While the NPS has offered tax benefits beyond Section 80C, recently the government approved a proposal to make NPS more attractive for subscribers by making the withdrawal from NPS completely tax-free. In this backdrop, it may be a good time to review the performance of NPS schemes. RupeeIQ used the data given by NPS Trust in its latest weekly update (ended January 4, 2019). Read on to know more.

NPS basics

For those who may not be fully aware, under NPS, how the money is invested will depend upon the subscriber’s own choice. NPS offers a number of funds and multiple investment options to choose from. In case subscriber does not want to exercise a choice, his/her money will be invested as per the Default choice of “Moderate Life Cycle Fund” under “Auto Choice” option, where the money will get invested in the various type of schemes as per subscriber’s age.

Read: All about National Pension System and how you can start saving for retirement

Coming back to approaches, the NPS offers two approaches to invest subscriber’s money:

1. Active choice – Individual Funds (Asset Class E, Asset Class C, and Asset Class G and Asset Class A)
Subscriber will have the option to actively decide as to how his/her NPS pension wealth is to be invested in the following three options:

Asset Class E – Investments in predominantly equity market instruments.
Asset Class C- investments in fixed income instruments other than Government securities.
Asset Class G – investments in Government securities.
Asset class A: Investment in Alternative Investment Schemes including instrument like CMBS, MBS, REITS, AIFs, InvIts etc.

This is newly introduced but as per norms, an NPS subscriber can choose to invest his/her entire pension wealth in C or G asset classes and up to a maximum of 50% in equity (Asset class E) and upto a maximum of 5% in asset class “A”. A subscriber can also distribute his/her pension wealth across E, C, G and A asset classes, subject to such conditions as may be prescribed by PFRDA.

2. Auto choice – Under this, NPS offers an easy option for those participants who do not have the required knowledge to manage their NPS investments. In case subscribers are unable/unwilling to exercise any choice as regards asset allocation, their funds will be invested in accordance with the Auto Choice option. In this option, the investments will be made in a life-cycle fund. Here, the proportion of funds invested across three asset classes will be determined by a pre-defined portfolio (which would change as per age of subscriber), with the investment in E decreasing and in C & G increasing with the age of the subscriber. Three Life Cycle funds are available under this Auto Choice.

NPS funds performance report card

RupeeIQ looked at the performance of asset classes E, C and G.

Equity funds – In asset class E, the investment is in predominantly equity market instrument. There are schemes of eight fund managers in this space, managing a total of Rs 5,700 crore belonging to 10.46 lakh subscribers.

In the past one year period, the average return has been -0.85%. The best one-year return of 1.29% has been clocked by SBI Pension Funds Pvt. Ltd, while the worst show of -3.63% belongs to the fund managed by Kotak Mahindra Pension Fund Ltd. Comparing their performance with the mutual funds, the worst one year return was -11.69% while the best is 9.18%.

In the three-year period, the NPS asset class ‘E’ returns are much better with average gain clocked coming in at 11.67% CAGR. The best return of 12.79% has been clocked by HDFC Pension Management Co. Ltd. The worst three-year return is 10.71% and this has been done by Reliance Capital Pension Fund Ltd.

In the five-year period, the NPS ‘E’ returns are steady. There are seven funds with five year track record, as Birla Sun Life Pension Management Ltd. hadn’t got the mandate yet. The average five year return is a respectable 12.37%, with the best gain of 13.19% by HDFC Pension Management Co. Ltd., while the worst is 11.03% by LIC Pension Fund Ltd.

Take a look at the returns picture below:

Asset Class E- Investment in predominantly equity market instrument

Pension Fund Inception
(Rs Crs)
Subscribers NAV Returns
1 Year
3 Years
5 Years
Birla Sun Life 9-May-17 34.74 7,786 11.4235 -1.07% NA NA 8.36%
HDFC Pension 1-Aug-13 1,538.11 286,886 20.6194 0.49% 12.79% 13.19% 14.26%
ICICI Pru. 18-May-09 1,106.17 161,953 27.6016 -0.35% 11.38% 12.29% 11.11%
Kotak Mahindra 21-May-09 219.84 33,509 25.2884 -3.63% 11.23% 12.26% 10.10%
LIC Pension 23-Jul-13 455.94 87,190 18.1384 -1.71% 10.76% 11.03% 11.53%
Reliance Capital 21-May-09 89.57 13,894 25.5887 -2.11% 10.71% 11.95% 10.25%
SBI Pension 15-May-09 1,963.41 398,650 23.9344 1.29% 12.26% 12.75% 9.47%
UTI Retirement 15-May-09 292.84 56,649 27.9425 0.25% 12.58% 13.08% 11.26%

Fixed income except GSecs – In asset class ‘C’, the investment is in fixed income instruments other than Government Securities. This is fixed income segment. However since the debt securities are beyond GSecs, the portfolios consist of bonds from private sector and government-owned entities. The returns in last one year have not been that impressive for this category which oversees funds worth over Rs 3,700 crore.

In the last one year, the average return of asset class ‘C’ funds are 5.45%, which are poorer than what liquid, short & ultra short debt mutual funds have given in the same time. The best one year return of 6.15% was notched up by ICICI Prudential Pension Fund Management Co. Ltd. The worst one year gain of 4.77% was secured by Kotak Mahindra Pension Fund Ltd.

In the three year period, asset class ‘C’ funds have done much better. The average return of 8.22% is pretty impressive. In comparison, such returns have been seen in only long-duration debt space in mutual funds. The best three year NPS fund gain of 8.55% again belongs to ICICI Pru Pension Fund, while the worst return of 7.87% belongs to LIC Pension Fund Ltd.

In the five year period, asset class ‘C’ funds have really given attractive returns of nearly 10% CAGR on an average. Very few debt mutual funds have been able to generate such returns in this time frame. Amongst NPS funds, the best asset class ‘C’ return of 10.21% was clocked by ICICI Pru. Pension Fund, while the worst gain of 9.58% was notched up by UTI Retirement Solutions Ltd.

Take a look at the returns picture below

Asset Class C-Investment in fixed income other than Govt Securities

Pension Fund Inception Date AUM
(Rs Crs)
Subscribers NAV Returns
1 Year
3 Years
5 Years
Birla Sun Life 9-May-17 18.96 7,737 11.3782 5.66% NA NA 8.10%
HDFC Pension 1-Aug-13 962.57 286,743 16.7302 5.50% 8.31% 9.83% 9.94%
ICICI Pru. 18-May-09 719.31 161,861 25.8518 6.15% 8.55% 10.21% 10.36%
Kotak Mahindra 21-May-09 148.57 33,425 25.4208 4.77% 8.12% 9.78% 10.15%
LIC Pension 23-Jul-13 301.02 87,333 16.6397 5.11% 7.87% 9.64% 9.78%
Reliance 21-May-09 59.98 13,879 23.1876 5.46% 8.32% 9.84% 9.13%
SBI Pension 15-May-09 1336.82 398,658 25.8679 5.90% 8.35% 9.83% 10.35%
UTI Retirement 15-May-09 178.33 56,438 23.2313 5.08% 8.02% 9.58% 9.15%

GSec funds – The asset class ‘G’ has Government written all over it. In this asset class, the investment is only in Government Securities or GSecs. There is also some exposure to SDLs or State Development Loan securities (for market borrowing by state governments). Despite GSecs seeing a roller-coaster ride in 2018, asset class ‘G’ funds in the NPS stable have not done that badly in 2018.

In the last one year period, the average return by asset class ‘G’ NPS funds is 8.19%, which is far higher than asset class ‘C’ and asset class ‘E’ funds. This is much higher than returns witnessed by MF investors in Debt- Gilt and Debt-Gilt with 10-year constant duration funds.

GSecs are clearly the staple diet for certain fund managers. In the last one year period, LIC Pension Fund Ltd. (which performed badly in corporate debt – asset class ‘C’) has managed to deliver nearly 10% returns and become the best performer. The worst return of 7.21% in last twelve months belongs to UTI Retirement Solutions Ltd.

In the last three year period, LIC Pension Fund Ltd. again takes the cake with the best return of 10.20% while UTI Retirement Solutions Ltd.’s patch continues as worst performer with 8.29%. The average return in NPS funds in last three year period is 9.12%, which is better than mutual funds focussed on GSecs.

In the five year period, asset class ‘G’ NPS funds have given an impressive 10.8% gain. All the funds have given more than 10% CAGR in this time period, generating good wealth for future pensioners. LIC Pension Fund Ltd., once again, comes to fore with 11.61% gain in 5 year period. UTI Retirement Solutions Ltd. is the worst among the set with 10.31% returns, which are actually better than average gains posted by mutual funds focussed on GSecs.

Take a look at the returns picture below.

Asset Class G- Investment in Government Securities

Pension Fund Inception Date AUM
(Rs Crs)
Subscribers NAV Returns
1 Year
3 Years
5 Years
Birla Sun Life 9-May-17 19.70 7,357 11.1007 7.78% NA NA 6.50%
HDFC Pension 1-Aug-13 1349.69 280,381 16.5848 8.34% 8.97% 10.58% 9.76%
ICICI Pru. 18-May-09 918.37 157,310 22.3838 8.19% 9.01% 10.79% 8.72%
Kotak Mahindra 21-May-09 202.38 32,715 22.2104 8.00% 9.17% 10.71% 8.62%
LIC Pension 23-Jul-13 472.54 89,161 17.7013 9.92% 10.20% 11.61% 11.04%
Reliance Cap 21-May-09 95.60 13,449 21.6890 7.92% 9.06% 10.73% 8.37%
SBI Pension 15-May-09 2434.24 398,026 24.1424 8.15% 9.16% 10.90% 9.57%
UTI Retirement 15-May-09 272.45 54,465 21.6213 7.21% 8.29% 10.31% 8.34%

Disclaimer – Please note that investors are requested to consult their financial, tax and other advisors before taking any investment decision.


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Poor NPS returns hit government employees

Report card: How have NPS pension fund managers performed?

PFRDA hikes equity limit in NPS to 75%

What happens to your NPS account if you change jobs?

PFRDA tweaks rules for NPS investments in mutual funds

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. He can be contacted on