NPS explained: How to choose the best pension fund managers?

NPS investments across Schemes E, C, and G

• NPS offers market-linked retirement savings with tax benefits and flexible investments.
• Scheme E funds like Kotak, HDFC, ICICI, and UTI show strong long-term returns
• Choose fund managers based on risk appetite, tenure, and investment goals

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Choosing the right pension fund manager can make a meaningful difference to your National Pension System (NPS) returns over the long term. With multiple fund managers, asset classes and investment choices on offer, many subscribers struggle to figure out where their retirement money should actually go.

NPS is a government-backed retirement savings scheme for subscribers designed to provide a regular income in their yonder years. Unlike other pension schemes, NPS is attractive as it gives subscribers options to invest in market-linked products, such as equities apart from corporate bonds and government securities.

NPS comes with tax benefits and is overseen by the Pension Fund Regulatory and Development Authority (PFRDA). Subscribers from Union and state government departments, as well as corporations and individuals, can invest in NPS. A Tier I (retirement) account is mandatory and only then can subscribers open a Tier II account to invest in market-linked options.

Let's break down how NPS pension fund managers work, how they have performed across equity, corporate bond, and government bond schemes and what investors should consider before making a choice.

Who are NPS pension fund managers?

Pension fund managers invest your NPS savings across three asset classes, namely Equity (E), Government securities (G), and Corporate bonds (C).

In December 2025, PFRDA merged Scheme A (Alternative Investment)into Schemes C and E, expanding the ability of latter schemes to invest in alternative assets such as REITs and InvITs.

Currently, there are 10 pension fund managers under the NPS, managed and regulated by the PFRDA, who help subscribers to invest across these three asset classes.

However, choosing the right pension fund manager could be a daunting task as the gap between the best and worst performer could be significant. We have analysed returns of these pension funds across different tenures and schemes or assets to help you make an informed decision.

For this purpose, we have analysed NPS Tier I schemes under E, C and G, wherein returns have been taken up to January 17.

NPS Fund Performance: Scheme E - Equities (Tier I)

For NPS Scheme E Tier I , which are funds that invest in equities, the pension funds that have delivered strong and steady returns over long periods (five years and above) include Kotak, HDFC, ICICI and UTI. Tata looks strong since its inception, especially in the short-term horizon (one to three years). SBI’s pension fund has delivered the lowest returns across most time periods.

NPS Fund Performance: Scheme C - Corporate Bonds (Tier I)

For NPS Scheme C Tier I, which invests in corporate bonds, pension funds that have delivered consistently strong returns across tenure is HDFC. Aditya Birla topped the seven-year returns.

That being said, most funds under Scheme C have delivered similar returns but higher than Scheme G’s one-year investment range (See below). Scheme E’s long-term returns are comparatively higher than schemes C and G.

NPS Fund Performance: Scheme G - Government Bonds (Tier I)

For NPS Scheme G Tier I , which invests in government securities, Aditya Birla’s pension fund has given consistent returns in one, three, and five-year periods. LIC’s pension fund has delivered strong returns for a longer investment term.

How to choose the best fund manager?

Under the common scheme structure, NPS gives subscribers two investment options: auto choice and active choice.

Under auto choice, fund managers allocate your investment on your behalf. Such a type of investment choice follows a life-cycle approach wherein the allocation of investment is more equity-oriented when the subscriber is young, and gradually decreases as they near their retirement age.

Active choice offers more flexibility in terms of asset allocation. Subscribers have the option to mix their contributions across different NPS schemes.

However, investment in Scheme E (equities) is capped to 75 percent, and up to 5 percent if you choose to invest in alternative assets. NPS allows 100 percent allocation under Scheme G (government securities) and C (corporate bonds).

From October 1, 2025, NPS has rolled out a major upgrade with the introduction of the Multiple Scheme Framework (MSF). Under this new framework, individuals can now invest up to 100 percent of their NPS contributions in equities, well above the earlier 75 percent limit.

The Multiple Scheme Framework allows each Pension Fund Manager (PFM) to offer more than one scheme within the same asset class, such as equity, corporate bonds, or government securities.

Under MSF, PFMs can design different schemes such as aggressive, balanced, or moderate options within each asset class to suit varying risk profiles. The idea is to give subscribers more choice and greater control over how their retirement money is invested.

Investors should be cautious when choosing NPS fund manager under both the frameworks and before investing in the National Pension System, ensure your allocation matches your risk appetite and long-term goals.