scorecardresearchNPS: Your investment returns vary based on your choice of pension fund manager? MintGenie decodes

NPS: Your investment returns vary based on your choice of pension fund manager? MintGenie decodes

Updated: 26 Aug 2022, 08:23 AM IST
TL;DR.
As Tata mutual fund is set to join the NPS Trust as one of the PFMs, we explore whether, and how widely, the returns vary between different pension fund managers
The difference in returns was noticeably significant among equity investments instead of debt investments

The difference in returns was noticeably significant among equity investments instead of debt investments

As Tata Asset Management is set to foray into pension business, NPS (National pension system) investors will soon have eight, instead of seven, pension fund managers to choose from. After Tata AMC, Max Life insurance will also follow suit because the latter has already received the pension fund body’s nod.

Although investors will soon have more options to choose from, but whether this would make a significant difference to the overall returns needs to be answered first. Here we compare the returns given by different pension fund managers across asset classes i.e., equity, corporate debt and government securities.

As far as returns on equity are concerned, different pension fund managers (PFM) indeed offered varied returns.

As shown in the table below, the past one-year returns vary between 7.9 percent and 9.84 percent amongst different pension fund managers, NPS data shows.

The three-year returns range between 15.13 percent and 16.92 percent by SBI PF and HDFC PF, respectively. The five-year returns for different PFMs range between 10.81 percent and 11.93 percent. Likewise, the returns since inception range between 10.53 percent and 14.65 percent a yawning gap of 4.12 percent.

Number of years   SBIPFLICPFUTIRSLICICI PFKOTAK PFHDFC PFBIRLA PF
1          9.16%9.84%7.90%8.34%8.45%8.33%9.28%
3              15.13%16.42%16.24%16.46%16.52%16.92%16.21%
5          10.81%10.78%11.33%11.34%11.32%11.93%11.51%
Since inception         10.53%12.51%11.99%12.06%11.42%14.65%12.36%

(Source: NPS Trust, data according to the NAV as on July 29, 2022)

However, the difference is not as significant when it comes to debt instruments be it corporate debt or government securities.

Sample this. The one-year returns on corporate debt by NPS are in the range of 2.42 percent and 3.4 percent, i.e., a difference of 98 basis points. The lower returns are given by UTI RSL (UTI Retirement Solutions), while the maximum by HDFC PF, as shown in the table below.

Similarly, the overall returns since inception are given in the range of 8.52 percent and 9.85 percent, i.e., a difference of 1.33 percent.

Number of yearsSBIPFLICPFUTIRSLICICI PFKOTAK PFHDFC PFBIRLA PF
1      2.93%2.81%2.42%2.79%2.99%3.40%3.13%
Since inception9.85%9.30%8.83%9.80%9.47%9.57%8.52%

(Source: NPS Trust, data according to the NAV as on July 29, 2022)

In a similar vein, the past one-year returns on government securities given by different pension fund managers vary between 2.02 percent and 2.57 percent i.e., a difference of 55 basis points.

The past five-year returns range between a minimum of 6.42 percent given by UTIRSL and a maximum of 7.46 percent delivered by LIC PF with a total difference of 104 bps.

So, upon comparing the data across asset classes, we can infer that the choice of a pension fund manager, indeed, does matter as it impacts the quantum of returns, particularly in the medium and long term.

Article
Retiring at 45 requires immaculate planning, disciplined savings and strict control over expenses.
First Published: 26 Aug 2022, 08:23 AM IST