Pension: Do you invest in NPS Tier 1 for pension? Where is your money going, how much return are you getting

National Pension System: Many people invest in National Pension System (NPS) for financial security after retirement. Especially the Tier 1 scheme of NPS is considered very good in terms of tax saving. The big feature of this market-based scheme started by the government is that it provides tax exemption on investment up to Rs 2 lakh during a financial year. Apart from this, the cost of investing in it is also very low. The return on investment in NPS is affected by the stock market return. But your money invested in it is managed professionally by experienced fund managers.

NPS Tier 1 Scheme: Top 10 Equity Funds

Most of the NPS funds have given good returns year after year. Here we are giving you information about the average annual return and annualized return of SIP for the last 10 years of the top 10 funds included in the equity plan of NPS Tier 1 scheme.

1. UTI Retirement Solutions

Average annual return on lump sum investment over 10 years: 14.53%

10 year annualized return on SIP: 17.27%

Value of SIP of Rs 10,000 after 10 years: Rs 29,55,310

Asset Under Management (AUM): Rs 2,457 crore

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2. ICICI Prudential Pension Fund

Average annual return on lump sum investment over 10 years: 14.25%

10 year annualized return on SIP: 17.25%

Value of SIP of Rs 10,000 after 10 years: Rs 29,51,760

Asset Under Management (AUM): Rs 14,986 crore

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3. Kotak Pension Fund

Average annual return on lump sum investment over 10 years: 14.26%

10 year annualized return on SIP: 17.10%

Value of SIP of Rs 10,000 after 10 years: Rs 29,28,300

Asset Under Management (AUM): Rs 2,416 crore

4. HDFC Pension Fund

Average annual return on lump sum investment over 10 years: 14.40%

10 year annualized return on SIP: 17.01%

Value of SIP of Rs 10,000 after 10 years: Rs 29,13,390

Asset Under Management (AUM): Rs 42,576 crore

5.LIC Pension Fund

Average annual return on lump sum investment over 10 years: 13.31%

10 year annualized return on SIP: 16.23%

Value of SIP of Rs 10,000 after 10 years: Rs 27,94,320

Asset Under Management (AUM): Rs 5,816 crore

6. SBI Pension Fund

Average annual return on lump sum investment over 10 years: 13.51%

10 year annualized return on SIP: 16.07%

Value of SIP of Rs 10,000 after 10 years: Rs 27,71,410

Asset Under Management (AUM): Rs 18,743 crore

(Source: Value Research)

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Why NPS is better despite market risk

There is market risk associated with the investment made in NPS. This risk is especially high in equity funds. Therefore, their past performance cannot be considered as a guarantee of getting the same returns in future. However, the market exposure of investors under the automatic plan in NPS is decided on the basis of their age under a pre-determined formula. This helps in controlling the market risk to a great extent. But if you want to get better returns by taking some more risk, then you can increase investment in equity by selecting the option of active plan. Despite the market risk, due to low cost of investment, experienced fund managers and regulated functioning by the Pension Fund Regulatory and Development Authority (PFRDA), NPS is considered a better option for investment for retirement purposes.