For Indians meticulously planning their retirement corpus, choosing the right Pension Fund Manager (PFM) for their National Pension System (NPS) investment is a critical decision. Subscribers have the freedom to select from ten different PFMs, and their performance can significantly impact the final retirement savings. Recent data reveals a notable disparity in the three-year returns delivered by these managers on their equity (Tier I) assets, with figures ranging between 13% and 16% per annum.
Top and Bottom Performers in NPS Equity Returns
The performance chart for the period ending 12 December highlights clear leaders and laggards. The highest returns were delivered by ICICI Prudential Pension Fund, Tata Pension Fund Management, and Kotak Mahindra Pension Fund. ICICI Prudential led the pack with an impressive 16.35% return, closely followed by Tata at 16.37% and Kotak Mahindra at 16.25%. UTI Pension Fund also posted a strong performance at 16.02%.
On the other end of the spectrum, SBI Pension Fund and Axis Pension Fund Management reported the lowest returns in the past three years. SBI Pension Fund's equity assets yielded 12.48%, while Axis Pension Fund Management delivered 13.76%. The full list of returns is as follows:
- Aditya Birla Sun Life Pension Fund: 14.60%
- Axis Pension Fund Management: 13.76%
- HDFC Pension Fund Management: 15.06%
- ICICI Prudential Pension Fund: 16.35%
- Kotak Mahindra Pension Fund: 16.25%
- LIC Pension Fund: 14.41%
- SBI Pension Fund: 12.48%
- Tata Pension Fund Management: 16.37%
- UTI Pension Fund: 16.02%
Flexibility and Choice in Your NPS Strategy
The National Pension System offers subscribers considerable flexibility. Individuals can choose their preferred pension fund manager, and this choice exists at both corporate and individual subscriber levels. Companies enrolling their employees in NPS can either select a PFM and investment choice on behalf of their staff or delegate this decision to the employees themselves.
Importantly, subscribers are not locked into their initial choice. The regulations permit changing the pension fund manager once every financial year, allowing investors to re-evaluate and switch based on performance or strategy. NPS operates with two account tiers: the compulsory Tier-I retirement account and the voluntary, more flexible Tier-II savings account.
Navigating Investment Choices: Active vs. Auto
When it comes to investing the corpus, NPS provides two distinct pathways. The first is 'Active Choice,' where the subscriber takes direct control. Individuals decide the exact allocation of their contributions across four asset classes: Equity (E), Corporate Debt (C), Government Bonds (G), and Alternative Investment Funds (A).
The second, simpler option is 'Auto Choice' or the lifecycle fund model. Here, subscribers select one of three pre-defined portfolios based on their risk appetite: Aggressive (LC75), Moderate (LC50), or Conservative (LC25). The key feature of these lifecycle funds is that the asset allocation is managed automatically, becoming more conservative as the subscriber ages, thereby reducing investment risk closer to retirement.
This structure ensures that the National Pension System caters to both hands-on investors who wish to micromanage their asset mix and those who prefer a hands-off, professionally managed approach that adjusts with their life stage. Making an informed choice between these options and selecting a competent pension fund manager are pivotal steps in securing a financially stable retirement.
