NPS: These pension fund managers gave 20% CAGR return on equity investment in Tier II accounts; see details | Mint

With the UPS (Unified Pension System) soon to become a reality in the next financial year, several government employees may decide to opt out of National Pension System (NPS) for UPS.

It is noteworthy that the UPS will for the time being be open only for the central government employees, which means the salaried employees in the private sector who subscribe to NPS will not be permitted to opt out of NPS for UPS.

For those who are not aware, NPS subscribers can maintain two accounts: NPS Tier I and Tier II. While Tier I is the mandatory account, Tier II is optional. Being optional, Tier II gives greater flexibility to investors in terms of withdrawal. So, unlike Tier I account, you can withdraw from Tier II account at any point of time. Sounds cool? Right!

So, it is somewhat similar to a mutual fund where you can invest and redeem as per your convenience. Here we scan through the returns delivered on equity investment in NPS Tier II accounts in the past five years.

(Source: npstrust.org.in; returns as on Sept 6, 2024)

There are 10 pension fund managers but a few of them were onboarded recently, therefore, the past five-year data is available only for the seven of them. As one can see in the table above, most pension fund managers (PFM) have delivered five-year returns on their equity investment in the range of 19-21 percent yearly.

The lowest return (19.25 per cent) was posted by SBI-pension fund whereas the highest return (20.87 percent) was given by ICICI-pension fund as on Sept 6, 2024.

Key things to know about NPS:

I. NPS does not offer fixed returns to subscribers. The returns are market-linked.

II. When you opt for withdrawal, 60 percent of it is exempted from tax.

III. Tier II account gives flexibility in terms of withdrawal to subscribers without any exit load.

IV. You can open Tier II account only when you have a Tier I account.

It is worth mentioning that there are four asset classes wherein NPS pension fund managers can invest: equity, corporate debt, government bonds and alternative investment funds. The above table shares details pertaining to investment only in one of these asset classes i.e., equity.