NPS Rate of Interest: Best Fund Manager for NPS 2022

Introduction

To help the citizens be able to build a sizeable retirement corpus, the government of India initiated the National Pension System (NPS).
The NPS offers four different types of assets wherein you can invest and get good returns at retirement.
Under this scheme, a defined contribution is invested in a mix of assets like Equity, Corporate debt, Government Bond and Alternative Investments.
The return from those assets helps generate income for the post-retirement corpus.
In a condition, you don’t mention your preference of fund at the time of the registration process, your investments will be invested in the default funds handled by the Pension Fund Regulatory and Development Authority.
These funds are Regulatory and Development Authority and managed by professional fund managers.
NPS interest rate is market-linked as they invest in asset classes (equities, debt, bonds) and dedicated fund managers undertake the task of managing the retirement money.

Also Read National Pension System: A Complete Guide for Retirement Plan

Current NPS Rate of Interest

Historically, the NPS rate of interest has been 10-12%, depending on the schemes chosen. However, there is no fixed interest rate established.

Fund Managers List

As of now, there are 8 pension fund managers.

  1. Aditya Birla Sun Life Pension Management Limited.
  2. HDFC Pension Management Company Limited.
  3. UTI Retirement Solutions Limited.
  4. SBI Pension Funds Private Limited.
  5. ICICI Prudential Pension Funds Management Company Limited.
  6. Reliance Pension Fund.
  7. Kotak Mahindra Pension Fund Limited.
  8. LIC Pension Fund.

SBI, LIC, and UTI Retirement Solutions are the only fund managers who manage pension contributions of government employees under NPS.

Any subscriber can switch between different pension funds,
But a fund needs to be continued for a minimum duration of one year before the subscriber switches it from one to another fund.
Your contribution to the NPS would grow over the years based on returns received from investments.

Also Read Tax Benefits of NPS: Enjoy 1.5L + 50K Extra Benefit | New & Old Regime

Let us see how has been the performance of NPS over the long term and interest rate.

NPS Rate of Interest for Top 4 Tier 1 Account

Three types of Tier 1 portfolio account, here we will compare 5 years of returns.

1. 75% of Equity + 25% of Corporate Bonds allocation.

Fund ManagerEquityCorporate BondNPS Returns
SBI Pension Fund7.96%9.77%8.4%
UTI Retirement Solutions 7.97%9.47%8.3%
LIC Pension Fund6.32%9.67%7.15%
HDFC pension
Management
8.90%9.98%9.17%

2. 50% Equity + 25% Corporate Bonds + 25% Government Bonds.

Fund ManagerEquityCorporate BondGovernment BondsNPS Returns
SBI Pension Fund7.96%9.77%10.37%9.01%
UTI Retirement Solutions 7.97%9.47%9.86%8.8%
LIC Pension Fund6.32%9.67%11.30%8.4%
HDFC Pension Management8.90%9.98%10.44%9.5%

3. Equal allocation across the 3 asset classes (approx.33%).

Fund ManagerEquityCorporate BondGovernment BondsNPS Returns
SBI Pension Fund7.96%9.77%10.37%9.20%
UTI Retirement Solutions 7.97%9.47%9.86%9.0%
LIC Pension Fund6.32%9.67%11.30%7.15%
HDFC Pension Management 8.90%9.98%10.44%9.17%

NPS Rate of Interest for Top 4 Tier 2 account

NPS Tier 2 accounts don’t have a fixed rate of interest. It gives returns by investing the amount in the 4 asset classes – equities, corporate bonds, government bonds, and alternative assets.
You can select your split between these assets subject to certain limits of 75% on equities and 5% on alternative assets.

Equity Performance

Fund manager 5 Year Returns in %
HDFC Pension Fund9.03
SBI Pension Fund7.84
Kotak Pension Fund7.95
UTI Retirement Solutions7.80

Corporate Bonds Performance

Fund manager 5 Year Returns in %
Kotak Pension Fund9.44
ICICI Prudential Pension Fund9.66
SBI Pension Fund9.50
UTI Retirement Solutions9.43

Government Bonds Performance

Fund manager 5 Year Returns in %
LIC Pension Fund11.46
HDFC Pension Fund10.25
SBI Pension Fund10.20
ICICI Prudential Pension Fund10.14

Source NPS

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