Average NPS Returns since launch of NPS for
Central Government Employees is 10.35 % which is rougly 1.5% to 2% higher than
Interest allowed in General Provident Fund meant for Cental Government
Employees during this period.
Economic Times reports as follows on NPS
Returns
NPS schemes for the general public have done
well due to the recent equity and bond rallies
They reached late, but NPS (National Pension System) investors have finally joined the party in the capital markets. An analysis by ET shows that NPS schemes have generated better returns than the provident fund.
They reached late, but NPS (National Pension System) investors have finally joined the party in the capital markets. An analysis by ET shows that NPS schemes have generated better returns than the provident fund.
The average NPS fund for Central government
workers has given 10.35% returns since launch, while the average state
government scheme has delivered 10.84%.The NPS schemes for the general public
have also done very well, thanks to the bullishness in the equity markets and
the recent rally in bonds.
The average equity fund has generated 14.6%,
while the corporate bond fund has given 10.6%. Gilt funds have given average returns
of 9.9%. These calculations are based on SIP returns on monthly contributions
from inception till December 2014.
The high returns should be music to the ears
of the estimated 36 lakh government employees (14 lakh central government and
22 lakh state government) who have nearly ` . 53,500 crore invested in NPS.
Three pension funds manage this gigantic corpus, which is almost 92% of the
assets under management (AUM) of the NPS.
But the higher returns have been accompanied
by greater volatility. The NPS funds did very well in 2012-13, but gave
pathetic returns in the following year.
As bond yields shot up in 2013-14, the SIP
returns of the average Central government fund was 5.4% while the average state
government fund grew only 4.9%. The 18% returns from equities that year didn’t
help much as these funds had only a small portion of their corpus in stocks.
|
Average Returns in (%)
|
||
|
Year
|
Central Govt NPS
|
State Govt NPS
|
|
2012-13
|
9.76
|
11.82
|
|
2013-14
|
5.37
|
4.96
|
|
2014-15
(Up to Dec)
|
19.63
|
20.08
|
|
From Launch of NPS
|
10.35
|
10.84
|
The Pension Fund Regulatory and Development
Authority (PFRDA) allows NPS managers to invest up to 15% in equities, but no
pension fund manager has ever hit that ceiling. As on November 30, 2014, the
central government scheme of UTI Retirement Solu tions had only 11.48% in
stocks, while the fund managed by SBI Pension Fund had allocated only 8.25% to
equities.
“The unsaid benchmark use for the central
government NPS is the EPFO rate of return. Therefore, PF managers keep a lower
allocation to stocks. But this compromises the long-term return potential of
the scheme. They should ideally increase the exposure to equity ,“ says Manoj
Nagpal, head of mar keting and business development at Zyfin Advisors and
founder CEO of Outlook Asia Capital.
Despite the conservative allocation, NPS funds
have given good returns in the first nine months of 2014-15. This is due to the
bond rally in 2014. The 10-year benchmark bond yield fell 135 basis points —
from 9.1% in April 2014 to around 7.8% by the end of 2014 — pumping adrenaline
into the NAVs of funds overweight on government bonds. The average SIP return
of the gilt funds in 2014-15 is close to 22%, better than the 20% delivered by
the equity funds in the period.
In the NPS segment for the private sector, the
E class (equity) funds have done well with average SIP returns of 14.6% since
the scheme was thrown open to the public in May 2009. ET looked at the returns
of four types of investors in the past three fiscals and since launch (see
table).
Interestingly, ICICI Prudential Pension Fund
has been the best performing pension fund for all four investor types. Kotak
Pension Fund and SBI Pension Fund are tied for the second position.
Source: The
Economic Times
