Fintotal News Analysis | NPS Gives Good Returns in 2012-13
NPS Gives Good Returns in 2012-13
Ruby Jacob, 20 May 2013

National Pension Scheme (NPS) the government's flagship retirement planning scheme has performed well. PFRDA, the government authority managing NPS released a statement of average returns from various fund managers of NPS for 2012-13 yesterday.

National Pension Scheme

NPS is a retirement scheme under the purview of PFRDA. One can open an account and keep contributing to build a corpus for retirement. There are 2 accounts: tier I and tier II. Tier I account which is a non-withdrawable account is necessary for having tier II account.

NPS contributions made by individuals directly, ie not through their employer, go to 3 broad asset classes- E (equity), C (corporate bonds & debt), G (govt bonds). While applying you can choose percentages of allocation in these or simply go for auto choice and have your contribution allocated on a formula based on your age.

While applying you also need to choose a fund manager of the 6 Pension Fund Managers (PFMs) who will manage your investment. At the age of 60 you can withdraw up to 60% as lumpsum and the remaining 40% must be used to buy an annuity from one of the life insurers.

NPS returns in 2012-13

PFRDA has provided a summary of returns from the 6 PFMs as follows

Scheme

Average returns (in %)

Central Government

12.39

State Government

13.00

Swavlamban

13.40

Individual: Equity

8.38

Individual: Corporate Debt

14.19

Individual: Government Debt

13.52

Central govt and State govt schemes have a 15:85 allocation in equity and debt respectively. The above returns are for the last 1 year ended 31st March 2013.

NPS returns are clearly much better than those from any other pension schemes like EPF, PPF and pension products from insurance companies. EPF gave 8.5% returns in 2012-13 while PPF returns were 8.8% in this period.

NPS Tier I vs tier II returns

An interesting observation from calculations is that returns from tier I funds are better than those from tier II in all PFMs.

PFM

Equities

Corporate securities

Govt bonds

Tier I

4 years annualized returns

Tier II

3.5 years annualized returns

Tier I

1 year returns

Tier I

1 year returns

Tier I

1 year returns

Tier II

1 year returns

ICICI

10.85%

5.07%

18.37%

17.48%

20.30%

20.53%

Reliance

9.35%

5.59%

17.14%

15.13%

20.35%

19.82%

SBI

6.57%

5.01%

17.74%

16.28%

19.62%

20.48%

UTI

9.44%

4.50%

16.21%

15.54%

20.14%

19.78%

Kotak

8.63%

6.28%

18.81%

16.60%

19.69%

18.58%

   *NAVs of LIC Pension Fund could not be accessed

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