Scheme E under NPS Tier I Account has given an average return of 23 per cent in the last year. It is in line with the rise in Indian stock market. BSE Sensex grew by 24 per cent in the last one year
As equity markets soar to fresh highs, the equity scheme of National Pension System (NPS) has impressed investors with double-digit returns in the last one year.
Scheme E under NPS Tier I Account has given an average return of 23 per cent in the last year. It is in line with the rise in Indian stock market. BSE Sensex grew by 24 per cent in the last one year.
HDFC Pension Fund, the biggest fund under equity scheme of NPS, delivered 24.19 per cent return over the last year, the highest in the category. Its assets under management (AUM) stand at Rs 6,680 crore.
It is followed by UTI Retirement Solutions, with 24.15 per cent return. All pension fund managers have given over 20 per cent returns in Scheme E of NPS in the last one year. Scheme E predominantly invests in equity market instruments
The performance during last year is also driving the long-term returns. Average return of NPS Scheme E in the last five years stood at 15 per cent, while 10-year return stood at over 11 per cent.
The big question: Should you expect NPS to deliver similar returns going ahead? Should you invest in NPS to earn similar return on your investments? Well, not really. The primary aim of investing in NPS should be to save for your retirement.
“The fundamental reason to invest in NPS should be to save for your retiral income in the long-term. The double-digit returns should not lure to join NPS,” says Dinesh Rohira, founder and CEO, 5nance.com.
Investors should tone down their expectations from equity schemes of NPS. “NPS is a market linked product. Equity scheme of NPS has grown in line with the growth in equity markets. The stock market will not give these kind of returns consistently. You may expect 12-14 per cent returns from NPS equity schemes on a CAGR basis in the long term,” says Rohira.
NPS caps the maximum equity investment to 75 per cent.
Returns of NPS debt schemes fall
Most pension fund managers also delivered double-digit returns under the debt schemes of NPS. However, the returns have come down slightly as bond markets reacted negatively to the large fiscal deficit which came as a surprise in the Budget 2021.
The returns under the debt schemes of NPS have fallen from the highs of about 14 per cent a few months ago to 11.2 per cent and 10 per cent under Scheme C and Scheme G , respectively.
While Scheme C mainly invests in corporate bonds, Scheme G of NPS invests mainly in government securities.
