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NPS equity schemes underperform the Nifty 50 over the past three years

LIC and SBI Pension funds were laggards, with 12.75 percent and 12.7 percent returns, respectively, over a three-year-period

June 30, 2021 / 11:11 AM IST

HDFC Pension Fund continued its reign at the top in the National Pension System’s (NPS) equity category, clocking 14.32 percent and 15.31 percent annualised returns respectively across three and five years. However, none of the schemes managed to outperform the benchmark Nifty 50 TRI (total return index) over the two horizons. Three out of seven funds did managed to beat their mutual fund counterparts over the three-year period, though only HDFC Pension Fund achieved this feat in the 5-year return category. LIC Pension Fund and SBI Pension Fund were the laggards, with 12.75 percent and 12.7 percent returns over a three-year-period as on June 21, as per data from Value Research. NPS offers market-linked to its subscribers – all citizens, government employees and also corporate sector employees. Subscribers in the all-citizen model can choose from seven pension fund managers and mix of four asset classes – equity, government securities, corporate debt and alternative assets.

Additional tax benefits through the corporate model

Subscribing through the corporate model is one of the relatively lesser-known ways of investing in the scheme. While NPS is mandatory for central government employees, private sector employers can voluntarily to offer this option to their employees, in addition to existing schemes like Employees’ Provident Fund (EPF). Employer contributions to their employees’ NPS accounts of up to 10 percent of their salaries (basic plus dearness allowance) can be claimed as deduction as ‘Business Expense’ from their Profit & Loss Account during the financial year. For employees, their employers’ contribution of up to 10 percent of their salary (14 percent in case of government employees) is allowed as deduction under section 80 CCD (2). This tax benefit is available under the with-exemption tax regime as well as the new system introduced in 2020-21.

Moneycontrol PF Team
first published: Jun 30, 2021 11:11 am