Almost all Tier-II government securities funds of the National Pension System (NPS) funds generated outstanding double-digit yields over three years. Over three years, the seven pension fund managers’ schemes generated returns between 11.01 percent and 13.5 percent annually, against 11.02 percent of the CCIL All Sovereign Bond benchmark and 10.78 percent of gilt mutual funds (10-year constant period). As per the list given below the LIC Pension Fund preserved its lead over its rivals in Tier-II, even holding the top position with 13.5 percent returns over three years. The HDFC Pension Fund was near on its side, ahead of the rest of the funds with an 11.7 percent yield.
Over the five-year return period, the LIC Pension Fund was also the highest leader, having scored 11.88%. Over this return horizon, all NPS funds outscored their benchmark and mutual fund peers, in accordance with their stellar success over the year. With exception of NPS Tier-1 or retirement accounts that expire only after you reach 60, Tier-II accounts have a lot of withdrawal options which implies that you can make withdrawals according to your needs. That being said, under section 80C, Tier-II accounts do not offer any tax advantages, except for government workers.
| G-Sec Funds | 3 Years Returns In % | 5 Years Returns In % |
| LIC Pension Fund | 13.5 | 11.88 |
| HDFC Pension Fund | 11.7 | 10.65 |
| ICICI Prudential Pension Fund | 11.4 | 10.56 |
| SBI Pension Fund | 11.34 | 10.58 |
| UTI Retirement Solutions | 11.33 | 10.36 |
| Birla Sun Life Pension Scheme | 11.31 | – |
| Kotak Pension Fund | 11.01 | 10.36 |
| Debt: Gilt with 10-year Constant Duration | 10.78 | 10.35 |
| CCIL All Sovereign Bond – TRI | 11.02 | 10.08 |
This strategy is an enticing prospect for investors because of the low expense level of one basis point. And, even though charges escalate next year, following the appointment of new pension fund managers by the Pension Fund Regulatory and Development Authority, that will happen eventually. NPS will be the best platform relative to mutual funds and other financial instruments, also at 0.09 per cent the highest proposed investment management fee-and 0.03 percent broker charges for equity schemes.
You have to open a Tier-I retirement account to invest in Tier-II accounts. At the time of opening the account, you have to contribute Rs 1,000, with nominal subsequent contributions being Rs 250. That being said, because it is a voluntary account, contributing in a year is not necessary. You can pick a pension fund manager of your preference from among the seven currently providing these services. The manager of your Tier-II pension fund should not be the same as your Tier-I account. Investment requirements will be close to those of Tier-I accounts, providing up to 75% equity asset class allocation to subscribers under 50. Conversely, you can choose the investment alternative of auto choice for controlling your corpus.
