If you hold a National Pension System (NPS) investment, then you probably know it doesn't give fixed returns. Instead, your returns depend on how markets perform—and more importantly, which pension fund manager (PFM) you are with. While investors get to choose between ten PFMs overseen by the Pension Fund Regulatory and Development Authority (PFRDA), only seven of them have operated for over three years.
The first glimpse of the three-year equity record of these seven PFMs shows significant variation in annual returns ranging from just over 15% to nearly 19%. These returns, updated to July 21, 2025, show how important it is to choose your fund manager actively on the strength of performance.
What are Tier I and Tier II in NPS?
NPS offers two types of accounts: Tier I and Tier II. Tier I is the mandatory, default retirement account with a withholding on withdrawal, while Tier II is a voluntary investment account that provides greater flexibility and allows you to withdraw funds whenever you want. Both accounts invest in equities, corporate bonds, government bonds, and alternative investments, and you have the option of deciding the proportion of your contribution in each asset class.
Best-performing PFMs in equity: Tier I accounts
Among Tier I equity funds, the best was ICICI PFM with a 3-year annualised return of 18.97%, followed by Kotak PFM (18.90%) and UTI PFM (18.61%). At the worst end was SBI PFM at 15.76%, and other contenders such as HDFC (17.47%),-brushing aside LIC (17.28%) and Aditya Birla (17.01%) were in the middle.
Best-performing PFMs in equity: Tier II accounts
In Tier II funds, Kotak PFM was the leader with a return of 18.85% for 3 years, narrowly beating ICICI PFM with 18.83%. UTI PFM was among the leading ones again with 17.77%. SBI PFM remained at the bottom with 16.39%. The rest of the PFMs had returns between 17% and 17.6%, including Aditya Birla with 17.57% and HDFC with 17.51%.
Beyond equity: shaping your NPS portfolio
While this analysis is focused on equity performance, NPS portfolios will also hold corporate bonds (C), government securities (G), and alternative investments (A). Conservative investors might have higher government or corporate debt weighting, aggressive investors might invest up to 50% in equity and up to 5% in alternatives. The capacity to switch asset allocation as well as fund managers provides another level of control to long-term NPS subscribers.
Equity returns are everywhere—choose your PFM wisely
The NPS's returns linked to the market mean that your pension corpus will, for the first time, be dependent on how your PFM is doing in the long term. ICICI, Kotak, and UTI are the top equity performers of the last three years, and SBI consistently being at the bottom, so get a check on your PFM option if you haven't done it in a while.
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