The National Pension System (NPS) is a type of retirement plan in which a voluntary retirement savings scheme in India designed to enable systematic savings. It is an initiative of the Government of India that protects the interest of the subscribers through regulations while offering them higher interest and returns. However, like any financial product, the NPS has its pros and cons, which we will explore to help you make an informed decision.
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†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
Total Investment
Returns Earned
Maturity AmountThe National Pension System (NPS) is a voluntary, long-term retirement savings scheme designed to enable systematic savings. It is particularly aimed at encouraging working individuals to invest in a pension account at regular intervals during their employment years. After the lock-in period, post-retirement, subscribers are eligible to withdraw a certain percentage of the accumulated corpus. The remaining amount is then disbursed to the account holder as a monthly pension, providing a steady source of income in their retirement years.
When considering the NPS, it is crucial to weigh the pros and cons of the system. Additionally, the selection of a pension fund manager plays a significant role in the potential success of your investment. The performance of NPS fund managers can vary, and therefore, it is recommended that individuals make an informed decision by thoroughly researching and comparing the different options available to them.
PFRDA has appointed NSDL e-Governance Infrastructure Limited as Central Recordkeeping Agency (CRA) for NPS - Lite. To log in to the NSDL portal, a person needs to generate an IPIN using PRAN (Permanent Retirement Account Number). This IPIN is generated from the NPS CRA login. Apart from this, one can also get annual transaction statements by email, invest in NPS, view status, etc. To generate IPIN, follow the below steps:
Step 1: Visit the NSDL CRA website
Step 2: Enter all the details
Step 3: Enter a new password and submit
An IPIN is generated, which is used for logging in to the NSDL portal.
Step 1: Log in to the NSDL eNPS home page and click on "Login with PRAN/IPIN."
Step 2: Now, you will get redirected to the NPS CRA login page, where you can use PRAN and IPIN to sign into your NPS account.
All the savings of the investor are pooled in the pension fund of the investor in the NPS scheme. Below are some of the advantages, or the "Pros," of the NPS scheme.
The funds contributed by subscribers are managed by a team of professional, qualified, and experienced NPS fund managers who are among the best in the industry. These fund managers operate under the strict regulatory framework of the Pension Fund Regulatory and Development Authority (PFRDA), ensuring that your investments are in safe and capable hands.
Investments in the Tier 2 accounts of the National Pension System (NPS) scheme have the potential to yield higher returns, which can accumulate significantly over time, resulting in a substantial corpus by the time of retirement planning. Similarly, funds in the Tier 1 account are accumulated for pension purposes. A significant portion of NPS investments is allocated to the equity market, which often results in returns that are considerably higher compared to the Employee Provident Fund (EPF).
The NPS Tier 1 account can be opened with a minor investment of Rs 500, while the Tier 2 accounts can be opened with a minor investment of Rs 1000. The amount can be deposited through a cheque, cash, or demand draft. Subsequently, for Tier 1 accounts, the account holder can make a minimum contribution of Rs. 500 per contribution or a minimum of Rs. 1000 per year. For tier 2 accounts, a minimum amount of Rs. 250 per contribution can be made.
A person can easily enter the scheme through multiple avenues. They can go to the NPS CRA Login page, or for the manual process, they would only need to fill out the NPS form and submit the identity and address proof.
All citizens of India, and also the NRIs, can invest in the scheme. It has a vast age span, which ranges from 18 years to 60 years (as it is a pension scheme). Initially, it was only for the "Government of India" employees, but later anybody, including freelancers, self-employed people, and businessmen, could invest in the scheme.
All investments in the NPS scheme are secured through regulations; hence, the subscribers enjoy better returns, which are also safeguarded.
The scheme is easily available, and one can easily subscribe to it by reaching nearby public sector or private sector banks or online through an NPS CRA login.
Even if an individual changes their employment, city, or state, the NPS CRA login or PRAN continues to remain the same.
Currently, for NPS, a cap of 50% to 75% has been imposed on equity exposure (for government employees, there is a cap of 50%). The equity exposure is reduced gradually every year by 2.5% starting from the year in which the investor turns 50 years of age. This helps stabilize the risk-return exposure of the investor.
Salaried Individuals:
Tax exemption up to Rs. 50,000 under section 80CCD (1B).
This benefit is in addition to the Rs. 1,50,000 limit under section 80C.
Can invest up to 10% of basic salary and dearness allowance for tax exemption under section 80CCD (1).
This exemption is subject to the Rs. 1,50,000 limit under section 80C.
Self-Employed Individuals:
Tax exemption up to Rs. 50,000 under section 80CCD (1B).
This benefit is in addition to the Rs. 1,50,000 limit under section 80C.
Can invest up to 20% of gross annual income for tax exemption under section 80CCD (1). Self individual can use nps calculator before investing for better retirement planning.
This tax exemption is subject to the Rs. 1,50,000 limit under section 80C.
Based on the individual's financial goals, one can select an asset class and then the best NPS fund manager. Every asset class comes with a particular investment limit. NPS has four asset classes, these include:
Asset Class A: Investments in assets like Commercial Mortgage-Backed Securities (CMBS), Real Estate Investment Trusts (REITs), and Infrastructure Investment Trusts (InVITs)
Asset Class C: Investments in corporate bonds
Asset Class G: Investments in Central and State Government bonds or Government Securities
Asset Class E: Investments in equities or stocks The asset allocation in NPS can be done using the Active Choice or Auto Choice option. The account will be operated by the best NPS fund managers.
Active Choice: Where the subscriber can choose the percentage of funds to be allocated to a particular asset class, such as E, C, and G, but the allocation to equity should not surpass 75%.
Auto Choice: Where the investments are made by the fund manager, who determines the percentages of assets allocated based on the subscriber's age.
It is always recommended to understand the various NPS fund manager performance and choose the best pension fund manager for NPS investment.
When you invest in the NPS, you are allotted your own Permanent Retirement Account Number (PRAN) through the NPS CRA login. The systematic pension investment plan provides for easy investments and helps retired and old age people to make monetary transactions with the least effort.
When subscribing to the NPS, an investor has the option to open:
A mandatory pension account (Tier 1).
An optional investment account (Tier 2), which can only be opened after having an active Tier 1 account.
The selection of a pension fund manager is crucial and should be based on:
Past performance.
Other relevant criteria.
The performance of the NPS fund manager is a significant factor in choosing a plan.
The NPS provides multiple investment avenues within a single scheme.
There are two methods to open an NPS account:
Offline, by visiting a Point of Presence Service Provider (POP-SP), such as a bank branch or post office.
Online, through the NPS login, using PAN and bank details.
There is an NPS lock-in period, however, any amount can be anytime withdrawn out of the investment (Tier 2) account, which makes the scheme even more lucrative.
Subscribers have the flexibility to select the best pension fund manager for their National Pension System account, and even have the option to change their fund manager if they wish to do so. This feature empowers individuals to make informed decisions and select a manager that aligns with their investment goals and preferences.
The NPS scheme has its own set of cons or disadvantages when we compare it to the other investment/pension options available.
The National Pension System (NPS) has a lock-in period and imposes restrictions on withdrawals from the pension account. Subscribers are not allowed to make any withdrawals before reaching the age of 60. However, after 10 years from the account opening date, the subscriber is permitted to make the first withdrawal. A maximum of three withdrawals are allowed until the subscriber reaches the age of 60. It is important to note that the amount withdrawn cannot exceed the total sum of contributions made by the subscriber to the pension account.
The NPS corpus, which the subscriber can use for buying an annuity plan or for drawing pensions, is taxable when the schemes mature. 60% of the investment in the NPS is taxed by the Government of India, while 40% escapes taxation.
A person can maintain a single NPS account through an NPS CRA login in their lifetime. While the PRAN can be easily ported across geography and jobs, 1 single individual will get a single PRAN.
The investment limit on equities has been confined to 75%. This may be a significant issue for individuals in their 20's-30's. This implies a possible loss of opportunity to get exposure to the equity markets.
The withdrawal from the Tier 1 account is restricted as it is the primary account for pension savings. At the time of maturity, one can withdraw 60% of the funds, and the remaining are used to buy an annuity. The returns of annuity are not tax exempted.
Many people are not aware of the financial terms relating to equities, debt, securities, and others. Hence, they fail to choose the best NPS fund manager for their NPS investments.
One must choose the best NPS fund manager while investing. Earlier, there were a total of seven NPS managers. Recently four more fund managers have been added. Let us look at the best NPS fund managers. It is hard to declare an out-and-out best pension fund manager for NPS, but we can share the names of all the eleven fund managers.
Aditya Birla Sun Life Pension Management
Axis Asset Management
DSP Investment Managers
HDFC Pension Management
ICICI Prudential Pension Fund Management
Kotak Mahindra Pension Fund
LIC Pension Fund
Max Life Pensions
SBI Pension Fund
Tata Pension Funds
UTI Retirement Solutions
| Best Pension Fund Managers | |||
| SBI Pension Fund | UTI Retirement Solutions | LIC Pension Fund | |
| 1-year return | 9.23% | 9.15% | 9.42% |
| 3-year returns | 7.40% | 7.65% | 7.83% |
| 5-year returns | 9.35% | 9.32% | 9.38% |
Returns as on 23-Oct-2023.
| Best Pension Fund Managers | |||
| SBI Pension Fund | UTI Retirement Solutions | LIC Pension Fund | |
| 1-year | 9.13% | 9.14% | 9.35% |
| 3-year | 7.28% | 7.63% | 7.73% |
| 5-year | 9.32% | 9.31% | 9.32% |
Returns as of 23-Oct-2023.
| Best Fund Managers | Returns (%) | ||
| 1-year | 3-year | 5-year | |
| Birla Sun Life Pension Scheme | 8.33% | 5.17% | 9.01% |
| HDFC Pension Fund | 8.18% | 4.91% | 9.06% |
| ICICI Prudential Pension Fund | 8.29% | 4.90% | 8.81% |
| Kotak Pension Fund | 8.23% | 5.06% | 9.03% |
| LIC Pension Fund | 8.32% | 5.09% | 9.51% |
| SBI Pension Fund | 8.45% | 4.91% | 8.88% |
| UTI Retirement Solutions | 8.55% | 4.96% | 8.74% |
Returns as of 23-Oct-2023.
| Best Pension Fund Managers | Returns (%) | ||
| 1-year | 3-year | 5-year | |
| Birla Sun Life Pension Scheme | 18.71% | 20.83% | 13.09% |
| HDFC Pension Fund | 17.57% | 21.85% | 13.83% |
| ICICI Prudential Pension Fund | 18.36% | 22.95% | 13.68% |
| Kotak Pension Fund | 18.12% | 22.65% | 14.13% |
| LIC Pension Fund | 16.85% | 23.22% | 13.06% |
| SBI Pension Fund | 17.07% | 21.54% | 12.77% |
| UTI Retirement Solutions | 16.05% | 22.18% | 13.04% |
Returns as of 23-Oct-2023.
| Best Pension Fund Managers | Returns (%) | ||
| 1-year | 3-year | 5-year | |
| Birla Sun Life Pension Scheme | 18.78% | 21.03% | 13.13% |
| HDFC Pension Fund | 17.70% | 21.84% | 13.84% |
| ICICI Prudential Pension Fund | 19.00% | 23.15% | 13.88% |
| Kotak Pension Fund | 18.21% | 22.49% | 13.97% |
| LIC Pension Fund | 16.28% | 23.34% | 13.12% |
| SBI Pension Fund | 17.02% | 21.68% | 12.82% |
| UTI Retirement Solutions | 16.15% | 22.29% | 13.07% |
Returns as of 23-Oct-2023.
| Best Pension Fund Managers | Returns (%) | ||
| 1-year | 3-year | 5-year | |
| Birla Sun Life Pension Scheme | 8.22% | 5.17% | 8.94% |
| HDFC Pension Fund | 8.07% | 4.84% | 8.86% |
| ICICI Prudential Pension Fund | 8.34% | 5.01% | 8.81% |
| Kotak Pension Fund | 8.06% | 5.00% | 8.67%% |
| LIC Pension Fund | 8.33% | 5.20% | 9.76% |
| SBI Pension Fund | 8.29% | 4.85% | 8.69% |
| UTI Retirement Solutions | 8.55% | 4.96% | 8.77% |
Returns as of 23-Oct-2023.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
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