The National Pension System (NPS) allows customers to choose between Active and Auto options. Under the Active option, you can decide the asset allocation across Equity, Corporate loans and Government securities, and under Auto Choice. You leave the decision to the rules and the pension fund manager. In such a case, the asset allocation is decided on the basis of your age and a pre-determined grid as per the NPS regulation.
Whereas under Auto Choice, as you age, the allocation for the asset class of government securities increases. After you turn 55, it goes up to between 75-90 percent depending on the lifecycle fund you choose. Its objective is to protect your hard earned money long term in the ups and downs of the market. NPS schemes G- or G-Sec funds have shown consistent performance especially in the last one year.
If we look at the data till November 17, 2021, all the seven pension fund managers gave returns between 10.52 per cent and 11.71 per cent in 3 years. Consistently performing well in this category, LIC Pension Fund tops the list with 11.71 per cent returns. After this, HDFC Pension Fund has given a return of 11.21 percent. On the other hand, UTI Retirement Solutions gave a return of 10.52 per cent, which was higher than the benchmark return. All the pension fund managers gave higher returns beating their peer gilt mutual fund (8.91 per cent) and the benchmark CCIL All Sovereign Bond TRI (10.51 per cent).
Even over a period of five years, NPS Schemes G outperformed Gilt Mutual Funds to a great extent. Six out of seven pension fund managers have given returns above the benchmark. LIC Pension Fund (8.67%) and HDFC Pension Fund (7.7%) both gave the best returns in the five-year category as well. However, UTI Retirement Solutions lagged behind with 7.16 per cent. It was the only pension fund manager to give returns marginally lower than the benchmark return of 7.26 per cent.
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