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The National Pension Scheme (NPS) is one of the most accepted pension-oriented products in India. The central government introduced the programme as part of a social security initiative for all Indian citizens. The NPS scheme allows individuals employed in public and private sectors to invest in low-risk equity funds, security funds, or alternative investments with good returns. We have covered the following in this article:
Investing in NPS will give you an edge over fixed-income schemes and allow you to avail of tax benefits up to Rs 2 lakh under Section 80C and Section 80CCD of the Income Tax Act, 1961, depending on the type of account, i.e. Tier-I or Tier-II. While the lock-in period on NPS schemes is until retirement, you can choose to withdraw your funds prematurely in specific cases to cater to unforeseen financial requirements.
The pension programme also gives you the benefit of choosing the allocation of your investments. The scheme gives you the option to select the funds either automatically or manually. While the active choice will allow you to determine the plan and percentage of your funds you wish to invest in, the auto choice will allocate your investments based on the risk assessment and your profile.
At present, there are 8 pension fund managers in the country.
SBI Pension Fund, LIC Pension Fund, and UTI Retirement Solutions are the only fund managers who manage pension contributions of government employees under NPS.
| Pension Fund Managers | SBI Pension Fund | UTI Retirement Solutions | LIC Pension Fund | |
|---|---|---|---|---|
| Net Asset Value (NAV) (As of 31 May 2021) | 35.7089 | 34.6881 | 34.751 | |
| Returns* | 6-month | 3.54% | 4.27% | 4.40% |
| 3-year | 11.29% | 11.29% | 11.28% | |
| 5-year | 9.93% | 10.07% | 9.93% | |
As of the 31st of May 2021, UTI Retirement Solutions generated the best returns of 10.20% in the past five years under the NPS central government scheme. The fund mainly invests in the banking finance sector, government sector, and financial institutions. The next in line is recorded by the SBI Pension Fund with the returns generated recorded at 19.93% for the same period. LIC Pension Fund also recorded the returns at 9.93% in the last five years.
| Pension Fund Managers | SBI Pension Fund | LIC Pension Fund | UTI Retirement Solutions | |
|---|---|---|---|---|
| Net Asset Value (NAV) (As of 31 May 2021) | 30.6780 | 30.9510 | 30.8513 | |
| Returns* | 6-month | 3.45% | 4.27% | 4.17% |
| 3-year | 11.31% | 11.17% | 11.25% | |
| 5-year | 9.92% | 9.85% | 9.98% | |
UTI Retirement Solutions generated the highest returns of 9.92% under the NPS state government scheme in the last five years. The fund’s portfolio is predominantly exposed to the financial sector (banking and housing credit institutions). SBI Pension Fund followed it by generating 9.92% returns over the last five years.
| Pension Fund Managers | Returns* | ||
|---|---|---|---|
| 6-month | 3-year | 5-year | |
| HDFC Pension Fund | 21.35% | 14.02% | 15.36% |
| UTI Retirement Solutions | 21.97% | 12.79% | 14.04% |
| SBI Pension Fund | 19.78% | 12.30% | 13.54% |
| ICICI Pension Fund | 21.44% | 13.14% | 13.90% |
| Kotak Mahindra Pension Fund | 20.79% | 13.34% | 13.96% |
| LIC Pension Fund | 21.44% | 13.14% | 13.90% |
| Term | Best Returns | Pension Fund Manager |
| 1-year | 58.07% | UTI Retirement Solutions – Scheme E – TIER I |
| 3-year | 14.26% | HDFC Pension Fund – Scheme E – TIER I |
| 5-year | 14.03% | UTI Retirement Solutions – Scheme E – TIER I |
| Pension Fund Managers | Returns* | ||
|---|---|---|---|
| 6-month | 3-year | 5-year | |
| HDFC Pension Fund | 21.23% | 13.93% | 15.41% |
| UTI Retirement Solutions | 23.07% | 13.36% | 14.35% |
| SBI Pension Fund | 19.75% | 12.41% | 13.61% |
| ICICI Pension Fund | 21.34% | 13.24% | 13.99% |
| Kotak Mahindra Pension Fund | 20.50% | 13.16% | 13.82% |
| LIC Pension Fund | 22.82% | 12.33% | 12.76% |
| Term | Best Returns | Pension Fund Manager |
| 1-year | 59.65% | UTI Retirement Solutions – Scheme E – TIER II |
| 3-year | 14.16% | HDFC Pension Fund – Scheme E – TIER II |
| 5-year | 14.36% | UTI Retirement Solutions – Scheme E – TIER II |
Calculate monthly Pension & Tax Benefits through Cleartax NPS Calculator Utilise the pension calculator to know the lump sum amount and the provisional pension you can expect on maturity or at the time of retirement based on your monthly instalments. All you have to do is key in the basic parameters of your scheme. The automated tool will calculate the tentative pension and the total corpus you can expect at the end of the tenure.
Most investors choose to invest in the NPS only to save on taxes. However, with the contribution to the NPS having been mandated for state and central government employees, many consumers have opted for the pension programme, unaware of the tax implications and benefit NPS offers. Hence, it is advised to ensure that you understand the rules regarding the withdrawal of funds and mandatory clauses involved in the product before you begin investing.
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