Performance of NPS schemes 2013-16 – PrognoAdvisor

Performance of NPS schemes 2013-16

National Pension System was launched 7 years back. Now there are about 1.31 crore subscribers and it manages about Rs.1.39 lac crores. Kerala state government has replaced old pension system with NPS from 1st April 2013. From then onwards about 48,000 new state government employees are added to NPS subscriber list from Kerala. They have so far contributed about Rs.270 crores and it is now valued at Rs.306 crores.

NPS is available not only for government employees but also for employees of companies and self-employed people.  While contributions of government employees are invested in specific funds meant for them, others have the flexibility to determine the type of funds they wish to invest.

NPS has 2 streams – Tier 1 and Tier 2. The investment in Tier 1 can’t be withdrawn till the age of 60 years. Upon reaching 60 years of age, the subscriber can withdraw upto 60% of the accumulated funds and 40% has to be invested in an annuity plan which will give regular pension. There is no loan facility also. This ensures that even if the person becomes bankrupt, when he reaches 60 years of age, he can get a monthly income to live through the old age. In case of Tier 2, the investment can be withdrawn at any point of time. So it is just like a mutual fund. But a person can contribute to Tier 2 only if he is contributing to Tier 1.

The cost of fund management of NPS is very low compared to mutual funds and ULIPs and hence they are expected to give higher returns. But that seemed to be counterproductive initially as returns from NPS were comparatively low. This led to criticism about fund management of NPS schemes. Now things seem to be changing as the returns from NPS have improved a lot.

While pension funds of LIC, SBI and UTI manages funds of government employees there are 8 fund manager options for others. The schemes meant for government employees have only 15% in equity and the rest is in fixed income securities.

In the last 3 years the average annual returns from funds for government employees are almost similar varying between 13.4% and 13.7%. If we take the performance since inception then the average annual returns are between 10.2% and 10.7%. So in the long term and medium term the returns yielded are higher than bank deposit interest rate and interest rate of EPF and PPF.

With respect to the equity funds, Reliance Pension fund has given the highest average annual returns among Tier 1(18.1%) and Tier 2(18.2%) for the last 3 year period. During the same period most of the diversified equity funds gave more than 23% returns per annum on an average with ICICI Pru Value discovery fund giving average annual returns as high as 37.10% during the same period. S&P BSE 500 index gave returns of about 20.5% during the period.  So the performance of NPS equity funds is not commendable during the last 3 years.

With respect to the government bond funds, ICICI Pension fund has given the highest average annual returns of 14.4% among both Tier 1 and Tier 2 schemes for the last 3 year period. During the same period most of the gilt funds gave more than 12% returns per annum on an average with Reliance GILT Securities fund giving average annual returns of14.2% during the same period. S&P BSE India Government Bond Index gave returns of about 12.1% during the period.  It seems that most of the government bond funds in NPS gave returns higher than respective index returns.

With respect to the corporate bond funds also, ICICI Pension fund has given the highest average annual returns among Tier 1(12.8%) and Tier 2(12.6%) for the last 3 year period.S&P BSE India Corporate Bond Index gave returns of about 11.3% during the same period.  It seems that most of the corporate bond funds in NPS gave returns higher than respective index returns.

The performances of all NPS funds are provided in the table. The performance of NPS funds have improved compared to the past and also is better than traditional retirement plans like PPF and EPF. In case of equity funds NPS funds’ performance has to improve a lot.

Schemes Annualised Returns 
Central Government Scheme 1 Year 2 Year 3 Year
LIC Pension Fund 12.61% 12.20% 13.60%
SBI Pension Fund 12.62% 12.76% 13.56%
UTI Pension Fund 13.88% 12.33% 13.43%
State Government Scheme 1 Year 2 Year 3 Year
LIC Pension Fund 12.49% 12.43% 13.73%
SBI Pension Fund 12.78% 13.03% 13.89%
UTI Pension Fund 13.97% 12.53% 13.54%
Tier 1 Equity Scheme 1 Year 2 Year 3 Year
LIC Pension Fund 12.24% 5.99% 14.52%
SBI Pension Fund 13.57% 6.89% 15.84%
HDFC Pension Fund 12.73% 6.66% 15.85%
ICICI Pension Fund 13.13% 6.75% 16.30%
Kotak Pension Fund 13.39% 7.01% 15.97%
Reliance Pension Fund 11.77% 6.16% 18.14%
UTI Pension Fund 14.47% 7.72% 16.82%
Tier 2 Equity Scheme 1 Year 2 Year 3 Year
LIC Pension Fund 10.83% 5.34% 7.95%
SBI Pension Fund 13.44% 6.91% 15.98%
HDFC Pension Fund 13.24% 6.99% 11.53%
ICICI Pension Fund 13.08% 6.74% 16.23%
Kotak Pension Fund 13.32% 7.03% 15.73%
Reliance Pension Fund 11.64% 6.06% 18.20%
UTI Pension Fund 12.36% 7.18% 17.07%
Tier 1 Corporate Bond Scheme 1 Year 2 Year 3 Year
LIC Pension Fund 11.36% 12.40% 12.02%
SBI Pension Fund 11.27% 12.08% 12.30%
HDFC Pension Fund 11.30% 12.25% 12.07%
ICICI Pension Fund 11.53% 12.83% 12.78%
Kotak Pension Fund 11.51% 12.25% 12.55%
Reliance Pension Fund 11.49% 12.06% 12.22%
UTI Pension Fund 12.03% 11.92% 12.09%
Tier 2 Corporate Bond Scheme 1 Year 2 Year 3 Year
LIC Pension Fund 12.03% 11.44% 10.48%
SBI Pension Fund 11.01% 12.07% 12.29%
HDFC Pension Fund 11.15% 10.19% 9.85%
ICICI Pension Fund 11.35% 12.65% 12.63%
Kotak Pension Fund 10.90% 11.81% 12.01%
Reliance Pension Fund 10.70% 11.73% 12.09%
UTI Pension Fund 11.73% 11.88% 12.11%
Tier 1 Govt Bond Scheme 1 Year 2 Year 3 Year
LIC Pension Fund 13.43% 14.03% 13.60%
SBI Pension Fund 13.90% 14.50% 14.30%
HDFC Pension Fund 13.81% 14.19% 13.81%
ICICI Pension Fund 13.90% 14.39% 14.40%
Kotak Pension Fund 14.71% 14.41% 14.29%
Reliance Pension Fund 14.15% 14.43% 13.35%
UTI Pension Fund 14.90% 13.92% 14.09%
Tier 2 Govt Bond Scheme 1 Year 2 Year 3 Year
LIC Pension Fund 13.01% 13.53% 13.81%
SBI Pension Fund 13.92% 14.43% 14.33%
HDFC Pension Fund 13.85% 13.99% 13.56%
ICICI Pension Fund 14.01% 14.42% 14.40%
Kotak Pension Fund 14.13% 14.19% 14.11%
Reliance Pension Fund 14.35% 14.61% 13.39%
UTI Pension Fund 15.23% 14.07% 14.26%
Corporate CG Scheme 1 Year 2 Year 3 Year
LIC Pension Fund 13.33% 12.91% 13.88%
SBI Pension Fund 12.88% 13.09% 13.98%
NPS Lite Scheme 1 Year 2 Year 3 Year
LIC Pension Fund 12.74% 12.24% 13.70%
SBI Pension Fund 12.71% 12.74% 13.72%
Kotak Pension Fund 12.60% 12.22% 13.65%
UTI Pension Fund 13.88% 12.32% 13.61%
Atal Pension Yogana 1 Year 2 Year 3 Year
LIC Pension Fund 12.65%
SBI Pension Fund 13.06%
UTI Pension Fund 14.45%

The above is the English transcript of the article published in the Mathrubhumi Dhanakaryam, dated 12th September 2016, written by Sanjeev Kumar G, Certified Financial Planner, Prognoadvisor.com

Athira Joy

Digital Officer at Progno Advisor

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