Savers – small and big – the world over are looking for safe havens, pushing up gold prices to new highs, even as equity markets have remained shaky. In India, corporate debt mutual funds suffered a blow due to defaults taking their toll on credit risk funds.
For National Pension System (NPS) subscribers, it’s the government securities portion (Scheme G) that has played the role of a ship-steadier over the last five years.
Pension fund managers have delivered robust returns of 10.44-11.85 per cent annually on the G-sec portfolio, according to data from Value Research. This scheme invests primarily in central and state government securities. LIC Pension fund stood out as the outlier, yielding returns of close to 12 per cent annually over five years. Gilt mutual funds category managed only about 9 per cent on an average in the same period.
Investment avenues
The NPS allows investments in equity, corporate debt, government securities and alternative asset schemes. These are managed by seven pension fund managers – LIC Pension Fund, UTI Retirement Solutions, SBI Pension Fund, ICICI Prudential Pension Fund, HDFC Pension Fund, Kotak Pension Fund and Birla Sun Life Pension.
You can choose between active and auto choices. In the active option, you need to take a call on how your investment will be distributed across asset classes. Your allocation to government securities can go up to even 100 per cent. In the auto choice, it will be pre-determined by the scheme, in line with your age. As you grow older, your exposure to equity and corporate debt will decline, with government securities funds garnering a bigger share. The objective is to protect your corpus against volatility risks as retirement nears.
At present, you can withdraw 60 percent of your NPS corpus when you turn 60, without paying tax. The remaining 40 per cent must be used to purchase annuities from designated life insurers.
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