Tata Pension Management, a NPS scheme, has offered the highest return in the last year of around 41.02% followed by UTI Pension Fund which gave 39.37% return in the said period.
ICICI Prudential Pension Fund Management gave 37.47% return in the same time period. SBI Pension Funds offered the lowest return of around 31.91% in the said time period.
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Now the important question is how NPS schemes have outperformed in the last one year?
“When looking at asset classes and their returns, it’s important to note that the returns are not homogenous. For example in real estate, not all properties will outperform the real estate index. Hence, while assessing, for example, Mutual Funds, one needs to look at the index/benchmark returns. These benchmarks serve as a standard to measure how well a fund is performing relative to the broader market or its specific sector. This provides a more accurate picture of a scheme’s performance,” commented Priti Rathi Gupta, Founder of LXME.
She further mentioned that, “Additionally, with thousands of mutual fund schemes available in the market, each with its own risk profile and time horizon. It’s important to recognize that comparing the returns of NPS schemes with mutual fund schemes over a single year may not provide a complete picture for investors to make an informed decision.”
In the recent budget announcement, the finance minister increased the tax deduction limit on employers contribution to NPS from 10% to 14% of the basic salary. This move has provided high tax benefits under the new tax regime.
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After the increase in tax benefits for NPS schemes, what should investors do? Should they increase their allocation in NPS?
“NPS is one of the investment options for retirement, investors can diversify their investments across different investment options like mutual funds, Gold, fixed-income instruments, etc! to manage the risks, liquidity and flexibility,” recommended Priti Rathi Gupta.
NPS is a market-linked defined contribution scheme that helps you save for your retirement. The scheme is simple, voluntary, portable and flexible. It is one of the most efficient ways of boosting your retirement income and saving tax. It allows you to plan for a financially secure retirement with systematic savings in a planned way, according to the NPS Trust website.
NPS is focused on saving for retirement whereas mutual funds help investors to plan for different financial goals. The NPS scheme has a certain maturity period of 60 years and withdrawal restrictions. Mutual funds offer a lot more flexibility and ELSS mutual funds come with a three-year lock-in. These funds have a minimum lock-in period amongst various tax saving options available under Section 80C.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)