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 Bonds, and Alternative Investments.
The return from those assets helps generate income for the post-retirement corpus.
In 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 are 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.
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Fund Managers List
As of now, there are 8 pension fund managers.
- Aditya Birla Sun Life Pension Management Limited.
- HDFC Pension Management Company Limited.
- UTI Retirement Solutions Limited.
- SBI Pension Funds Private Limited.
- ICICI Prudential Pension Funds Management Company Limited.
- Reliance Pension Fund.
- Kotak Mahindra Pension Fund Limited.
- 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 the interest rate.
Related Links | |
What is the difference between Bond and Equity? | NPS vs PPF: NPS vs APY |
What is the difference between Bond and Debenture? | SGB vs FD |
RBI Bonds vs Tax Saving Fixed Deposits vs SGBs |
NPS Rate of Interest for Top 4 Tier 1 Accounts
Three types of Tier 1 portfolio accounts, here we will compare 5 years of returns.
1. 75% of Equity + 25% of Corporate Bonds allocation.
Fund Manager | Equity | Corporate Bond | NPS Returns |
---|---|---|---|
SBI Pension Fund | 7.96% | 9.77% | 8.4% |
UTI Retirement Solutions | 7.97% | 9.47% | 8.3% |
LIC Pension Fund | 6.32% | 9.67% | 7.15% |
HDFC pension Management | 8.90% | 9.98% | 9.17% |
2. 50% Equity + 25% Corporate Bonds + 25% Government Bonds.
Fund Manager | Equity | Corporate Bond | Government Bonds | NPS Returns |
---|---|---|---|---|
SBI Pension Fund | 7.96% | 9.77% | 10.37% | 9.01% |
UTI Retirement Solutions | 7.97% | 9.47% | 9.86% | 8.8% |
LIC Pension Fund | 6.32% | 9.67% | 11.30% | 8.4% |
HDFC Pension Management | 8.90% | 9.98% | 10.44% | 9.5% |
3. Equal allocation across the 3 asset classes (approx.33%).
Fund Manager | Equity | Corporate Bond | Government Bonds | NPS Returns |
---|---|---|---|---|
SBI Pension Fund | 7.96% | 9.77% | 10.37% | 9.20% |
UTI Retirement Solutions | 7.97% | 9.47% | 9.86% | 9.0% |
LIC Pension Fund | 6.32% | 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 Accounts in 2023
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 Fund | 9.03 |
SBI Pension Fund | 7.84 |
Kotak Pension Fund | 7.95 |
UTI Retirement Solutions | 7.80 |
Corporate Bonds Performance
Fund manager | 5 Year Returns in % |
---|---|
Kotak Pension Fund | 9.44 |
ICICI Prudential Pension Fund | 9.66 |
SBI Pension Fund | 9.50 |
UTI Retirement Solutions | 9.43 |
Government Bonds Performance
Fund manager | 5 Year Returns in % |
---|---|
LIC Pension Fund | 11.46 |
HDFC Pension Fund | 10.25 |
SBI Pension Fund | 10.20 |
ICICI Prudential Pension Fund | 10.14 |
Source NPS