LIC and HDFC pension funds are the top performers among NPS gilt schemes

National Pension System’s (NPS) schemes G – government securities funds – have been consistently yielding impressive returns, towering over their equity and corporate debt counterparts. Their performance comes in the backdrop of falling interest rates.

All pension funds have outperformed their mutual fund gilt counterparts as also the benchmark – CCIL All Sovereign Bond TRI – in the three-year category, as per data from Value Research, a mutual fund tracking firm. Gilt mutual funds and the benchmark yielded 10.33 percent and 10.39 percent respectively during the period. NPS schemes G notched up returns between 10.46 percent and 11.99 percent.

All g-sec funds deliver double-digit returns

In contrast with its performance in schemes E (equity) and C (corporate debt), LIC Pension Fund has constantly topped the list of G-sec performers. It delivered the highest return of 11.99 percent and 11.48 percent respectively in three-year and five-year return categories as on November 24, 2020. HDFC Pension Fund, too, has been a consistent performer, reporting 11.23 percent and 10.6 percent returns respectively during the two return periods.

Even the poorest performer in the list – UTI Retirement Solutions – beat both gilt mutual funds as well as the benchmark over three years. While it is the only fund that has not outperformed gilt mutual funds over five years, it was just shy of that category with 10 percent returns annually.

NPS’ popularity as a retirement vehicle is growing, though the schemes offer market-linked returns unlike employees’ provident fund (EPF). You can invest in equities, corporate debt, government securities and alternative asset schemes through the seven NPS pension fund managers. These are LIC Pension Fund, UTI Retirement Solutions, SBI Pension Fund, ICICI Prudential Pension Fund, HDFC Pension Fund, Kotak Pension Fund and Birla Sun Life Pension Scheme.

If you are under 50 years of age, you can allocate up to 75 percent of your investment towards equities under the active choice. For those over 60, the ceiling is 50 percent. If you wish to leave the decision-making to the scheme, you can select auto choice, also known as the lifecycle fund. Under this plan, your corpus’ exposure to equity and corporate debt will shrink, and government securities’ share will increase. The purpose is to ensure that your corpus is protected in safe instruments at the time of your retirement. Investments in NPS is eligible for deductions of up to Rs 1.5 lakh under section 80C and Rs 50,000 under 80CCD (1B). In addition, employers’ contribution of up to 10 percent (14 percent for government employees) of your salary (basic pay plus dearness allowance) is eligible for tax break under section 80CCD(2).