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Complete guide to National Pension Scheme (NPS) returns

3 mins read

Sep 16, 2024

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NPS returns are a crucial aspect of the National Pension System (NPS), a powerful investment solution that provides a range of benefits, such as professional management, flexibility in investment options, tax benefits, annuity income, etc. This government-backed pension scheme allows investors to build a substantial retirement corpus and ensure financial security.

In this guide, we will explore the world of NPS returns, the types of NPS investment options and who can take advantage of NPS benefits.

What is NPS returns?

NPS returns refer to the profits or income generated from investments made under the National Pension System. NPS calculation of returns is based on the performance of an underlying asset (for example- equity, corporate debt, government bonds, and alternative investment funds etc.), which contributes to the growth of your retirement corpus.

Simply put, higher National Pension Scheme returns mean a high pension wealth, resulting in regular income or a comfortable post-retirement life. To get an idea of your expected NPS returns, use the NPS Returns Calculator.

Types of NPS investment options and their returns

Various banks offer investment in NPS schemes with flexible investment options, helping you secure a stable and tax-efficient retirement plan tailored to your financial goals.

Equity (Scheme E): Best suited for investors with a high-risk appetite willing to ride market fluctuations and seeking high investment returns.
Corporate Debt (Scheme C): Ideal for moderate-risk investors looking for stable returns with relatively low market volatility.
Government Securities (Scheme G): Suitable for conservative investors looking for a safe investment option with stable returns.
Alternative Investment Funds (Scheme A): Suitable for investors with a high-risk appetite who want to explore investing in alternative instruments like Commercial Mortgage-Backed Securities (CMBS), Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs) etc.

Equity

This is an equity-focused scheme in which a significant portion of funds is invested in equity and equity-related instruments.

Equity – Tier 1	1 Year	3 Years	5 Years	7 Years	10 Years
Min.	34.21%	16.97%	19.33%	15.08%	12.99%
Max.	43.51%	19.29%	21.40%	16.39%	14.34%
Category Average	38.49%	18.08%	20.59%	15.79%	13.81%

Returns over 1 year are annualised. Performance as of 30 August 2024.
Past performance may or may not be sustained in the future.
Source: NPS Trust

Corporate Debt

This is a corporate bond-focused scheme in which funds are allocated to corporate debt and related instruments.

Corporate Debt – Tier 1	1 Year	3 Years	5 Years	7 Years	10 Years
Min.	8.06%	6.05%	6.98%	6.92%	8.50%
Max.	8.65%	6.44%	7.76%	7.98%	9.08%
Category Average	8.40%	6.17%	7.38%	7.47%	8.78%

Returns over 1 year are annualised. Performance as of 30 August 2024.
Past performance may or may not be sustained in the future.
Source: NPS Trust

Government Securities

This scheme exclusively invests in government bonds and related instruments, such as central government bonds, state government bonds, etc.

Government Securities – Tier 1	1 Year	3 Years	5 Years	7 Years	10 Years
Min.	9.98%	6.72%	7.17%	7.50%	8.95%
Max.	10.52%	7.11%	7.43%	8.17%	9.72%
Category Average	10.27%	6.95%	7.30%	7.74%	9.26%

Returns over 1 year are annualised. Performance as of 30 August 2024.
Past performance may or may not be sustained in the future.
Source: NPS Trust

Alternative Investment Funds

This scheme offers diversification benefits by investing into alternative investment options like CMBS, REITS, AIFs, Invlts etc.

Alternative Investment Funds – Tier 1	1 Year	3 Years	5 Years	7 Years
Min.	6.7%	6.2%	5.9%	6.3%
Max.	13.5%	8.6%	9.3%	9.1%
Category Average	9.8%	7.1%	7.1%	7.5%

Returns over 1 year are annualised. Performance as of 30 August 2024.
Past performance may or may not be sustained in the future.
Source: NPS Trust

Who should Invest in NPS?

NPS is a good investment option for those individuals who are looking for long-term and reliable retirement savings. NPS provides you with two investment options: Active and Auto choice. Active choice offers flexibility to create your own asset allocation among four asset classes (Scheme E, C, G or A) as per your risk appetite. In Auto choice, the asset allocation is managed automatically on a pre-defined formula based on your age.

The following individuals can consider investing in NPS as part of their retirement planning:

Young working professionals who wish to build a strong retirement corpus from early years.
Salaried individuals who wish to build a diversified portfolio.
Self-employed individuals looking to secure their post-retirement life.
Risk-averse investors looking for secured investment avenues.
Individuals seeking tax benefits.

Also Read: Advantages and disadvantages of NPS

Conclusion

The National Pension Scheme plays an important role in helping investors secure their post-retirement years, offering various schemes with different risk-returns potential.

Hence, you must review different schemes, check fund performance and choose a fund that best aligns with your financial goals, retirement plans and risk appetite.

To start investing, you can apply online or visit your nearest Axis Bank branch, as all our branches are authorised for NPS.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.