A sharp 1,000 points fall in benchmark Nifty50 since October 1 has weighed in on the annual return generated by pension funds on NPS monies parked in equity schemes.
As against an annual return of near 40 percent recorded as of September 28, the return from equity schemes has moderated to 33.48 per cent as of October 12, latest PFRDA data showed.
The latest return is still much higher than the 13.86 per cent in central government scheme and 13.99 per cent in State government scheme. Average return generated by Pension Funds for Atal Pension Yojana in the last one year stood at 14.04 percent, while the return was 9.32 per cent since inception.
In the last one year, riding on buoyant equity markets, the NPS monies parked in pure Equities has given astronomical returns going up to as high as 40 per cent.
NPS scheme has generated competitive returns since inception. For the government sector, NPS has given an average return of 9 per cent since inception. For the non-government sector, the equity scheme has given return of 14.5 per cent, corporate debt 9.1 percent and government securities 8.9 per cent.
Private Sector AUM
Private sector NPS assets growth continue to be on a roll, clocking a near 42 per cent year-on-year growth as of October 12,2024 at ₹ 2.69 lakh crore.
The number of NPS subscribers in the non-government sector (private sector) also saw impressive growth, with a 21 percent year-on-year rise to 60 lakh, latest data from the Pension Fund Regulatory and Development Authority (PFRDA) showed.
The private sector’s strong NPS assets growth of 42 percent has substantially outpaced the government sector’s 27.8 percent year-o-year growth, albeit on a much higher base.
Government sector (Centre and State government) NPS assets touched ₹ 10.24 lakh crore as of October 12, PFRDA data showed.
The surge in private sector NPS assets highlights the rising appeal of NPS as a preferred retirement savings vehicle, say pension industry observers.
This steady increase in participation underscores the private sector’s ongoing recognition of NPS as a flexible, cost-effective, and tax-efficient solution for long-term financial planning, they added.
While Corporate sector related NPS accounted for ₹ 2 lakh crore AUM, the ‘All Citizen Model’ (basically individuals) had assets to tune of ₹ 59,697 crore.
The number of subscribers in Corporate sector (employees of companies who have signed up) stood at 21.55 lakh, while there are 38.43 lakh subscribers in ‘All Citizen Model’.
One of the key attractions for this remarkable uptake from the private sector in recent years is the “flexibility” that NPS offers in choice of investment pattern for such subscribers. PFRDA had recently further widened the choice for non government sector with launch of Balanced Life Cycle Fund.
Unlike NPS for government sector, the scheme for non-government sector (all citizens and corporate NPS) allows contributors to choose their asset allocation between equity, government bonds, corporate bonds, and alternative investments, depending on their risk appetite.
This freedom appeals to a diverse range of private sector employees, from young professionals looking to maximize equity returns to risk-averse older employees preferring safer options. This flexibility also aligns with the changing financial mindset, as individuals increasingly seek personalized investment choices.
Moreover, NPS stands out for its “cost-effectiveness”. With a low fund management fee of around 0.09 percent, it is one of the most economical long-term savings instruments in India.
In comparison to other retirement schemes, such as mutual funds or Employee Provident Fund (EPF), the lower costs of NPS make it highly attractive to both employers and employees in the private sector. For employers, offering NPS as part of a retirement benefits package enhances the company’s appeal to top talent, while employees gain access to a tax-efficient, low-cost retirement vehicle, corporate observers said.
OVERALL AUM
Meanwhile, the overall NPS assets under management (both government and non-government together) as of October 12, grew 30.56 percent to ₹ 13. 40 lakh crore, latest PFRDA data showed.