Best National Pension Scheme (NPS Scheme) in 2022
Many NPS funds have beaten mutual fund schemes in the past. Investors are willing to explore National Pension Scheme (NPS) as part of their retirement planning which can also provide tax savings every year. There are several NPS fund managers in India. Selection of fund manager and scheme composition makes a big difference in the returns. Which is the Best National Pension Scheme (NPS) in 2022? Who is the best NPS fund manager in 2022?
Also Read: 9 Safe Investments and High Returns in India
What is National Pension Scheme (NPS)?
NPS is the government approved investment cum pension scheme. NPS is regulated and administered by PFRDA. NPS can be opened by all the employees of public sector, private sector and even unorganized sector.
What are the different types of NPS accounts?
There are two types of NPS accounts:
Tier-1 Account: It is a basic pension account. There are T&C for withdrawals.
Before attaining 60 years of age, one can withdraw up to 25% of the contribution and balance 75% needs to be utilized to purchase a pension scheme.
After attaining 60 years of age, 60% of the contributions can be withdrawn and balance 40% needs to be invested in purchasing a pension scheme to get regular pension income.
Tier-II Account: It is voluntary option where the subscriber can withdraw 100% of the contribution.
Every NPS subscribe has to first open Tier-I account. If they choose to open Tier-II, they need to mandatorily open Tier-I before opening Tier-II.
Features of National Pension Scheme (NPS)
Here are the key feature of the NPS scheme.
NPS is investment cum pension scheme for employees across government and private sectors.
There are two types of NPS accounts – Tier-I and Tier-II.
Once registered, NPS subscribers need to contribute a minimum of ₹ 500 and a minimum annual contribution of 6,000 in a financial year. In case of Tier-II the minimum amount is ₹ 250 per contribution per financial year.
Under NPS, the contribution made by the NPS subscriber is invested in market linked instruments which includes equity and debt. The returns from the NPS funds depends on the performance of the underlying asset classes. The returns range between 9% to 11% in the long run.
Any Indian citizen in the age group of 18 years to 70 years can open NPS account.
NPS is regulated by PFRDA.
NPS gets matured at 60 years and can be extended to 75 years.
NPS subscribers can make partial withdrawals up to 25% after 3 years of opening the account on special conditions like purchasing a home, sponsoring a child’s education or for treatment of any critical illnesses.
One can do a partial withdrawal for 3 times within 5 years of intervals in the entire NPS tenure.
Contributions made in NPS Tier-I up to 10% of the salary (20% of gross income in case of self employed) can be claimed as tax benefit u/s 80c up to ₹ 1.5 Lakhs and another 50,000 u/s 80CCD (1B). No income tax exemptions available for contributions made in NPS Tier-II.
One cannot withdraw 100% after retirement. They can withdraw 60% of the total corpus and the balance of 40% is invested in the pension scheme to receive regular pension.
What are various types of funds in National Pension Scheme in India?
Below are the various types of funds
1) Scheme E – Investment in Equity
2) Scheme C – Investment in Corporate Bonds, which includes bonds of a government company, PSUs and other private sector companies
3) Scheme G – Bonds issued by Central Government
4) Scheme A – Alternative investment fund or AIF which also includes InvITs, REITs etc.
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List of NPS Fund Managers in India
Currently there are 7 fund managers offering NPS in India. Out of them only 3 are offering for Government sector companies.
A) Pension Funds for Government Sector
- LIC Pension Fund
- SBI Pension Fund
- UTI Retirement Solutions
B) Pension Funds for Private Sector
- LIC Pension Fund
- SBI Pension Fund
- UTI Retirement Solutions
- HDFC Pension Fund
- ICICI Pension Fund
- Kotak Mahindra Pension Fund
- Aditya Birla Sun Life Pension Fund
Best National Pension Scheme (NPS Scheme) in 2022
Let us check the NPS scheme returns in the last 1 to 10 years and find out who is the Best NPS fund manager in 2022.
1) Tier-I – Scheme E (Equity)
Here are the NPS returns in the last 1 to 10 years. Since 3 NPS fund managers have NPS schemes in < 10 year history, let us compare them with 3 to 5 years annualized returns.
| Pension Fund | 1 Yr | 3 Yr | 5 Yr | 10 Yr |
|---|---|---|---|---|
| HDFC Pension Fund | 15% | 19% | 15% | NA |
| Kotak Mahindra Pension | 17% | 18% | 15% | 13% |
| ICICI Pru. Pension Fund | 16% | 18% | 14% | 13% |
| UTI Retirement Solutionns | 16% | 17% | 14% | 13% |
| SBI Pension Fund | 15% | 16% | 14% | 13% |
| LIC Pension | 18% | 17% | 13% | NA |
If you observe, HDFC, Kotak Mahindra and ICICI Pru Pension Funds have beaten its peers in 3 to 5 years returns.
2) Tier-I – Scheme C (Corporate Bonds)
Here are the NPS returns in the last 1 to 10 years. Since 3 NPS fund managers have NPS schemes in < 10 year history, let us compare them with 3 to 5 years annualized returns.
| Pension Fund | 1 Yr | 3 Yr | 5 Yr | 10 Yr |
|---|---|---|---|---|
| HDFC Pension | 7% | 10% | 9% | NA |
| SBI Pension Fund | 6% | 10% | 8% | 10% |
| ICICI Pru. Pension Fund | 6% | 10% | 8% | 10% |
| LIC Pension | 6% | 10% | 8% | NA |
| UTI Retirement Solutionns | 6% | 9% | 8% | 9% |
| Kotak Mahindra Pension | 6% | 9% | 8% | 9% |
| Aditya Birla Sun Life Pension | 7% | 10% | NA | NA |
If you observe, HDFC, SBI and ICICI Prudential Pension Fund have beaten its peers in 3 to 5 years returns.
3) Tier-I – Scheme G (Government Bonds)
Here are the NPS returns in the last 1 to 10 years. Since 3 NPS fund managers have NPS schemes in < 10 year history, let us compare them with 3 to 5 years annualized returns.
| Pension Fund | 1 Yr | 3 Yr | 5 Yr | 10 Yr |
|---|---|---|---|---|
| LIC Pension | 4% | 10% | 9% | NA |
| HDFC Pension | 3% | 9% | 8% | NA |
| SBI Pension Fund | 4% | 9% | 8% | 9% |
| Kotak Mahindra Pension | 4% | 9% | 8% | 9% |
| ICICI Pru. Pension Fund | 4% | 9% | 8% | 9% |
| UTI Retirement Solutionns | 3% | 9% | 8% | 9% |
| Aditya Birla Sun Life Pension | 4% | 9% | NA | NA |
If you observe, LIC Pension Fund, HDFC Pension Fund and SBI Pension Fund have beaten its peers in 3 to 5 years returns.
4) Tier-II – Scheme E (Equity)
Here are the NPS returns in the last 1 to 10 years. Since 3 NPS fund managers have NPS schemes in < 10 year history, let us compare them with 3 to 5 years annualized returns.
| Pension Fund | 1 Yr | 3 Yr | 5 Yr | 10 Yr |
|---|---|---|---|---|
| HDFC Pension | 15% | 18% | 15% | NA |
| UTI Retirement Solutionns | 15% | 17% | 14% | 13% |
| Kotak Mahindra Pension | 17% | 18% | 14% | 13% |
| ICICI Pru. Pension Fund | 16% | 18% | 14% | 13% |
| SBI Pension Fund | 14% | 16% | 14% | 13% |
| LIC Pension | 18% | 17% | 13% | NA |
| Aditya Birla Sun Life Pension | 14% | 17% | NA | NA |
If you observe, HDFC, UTI and the Kotak Mahindra Pension Fund have beaten its peers in 3 to 5 years returns.
5) Tier-II – Scheme C (Corporate Bonds)
Here are the NPS returns in the last 1 to 10 years. Since 3 NPS fund managers have NPS schemes in < 10 year history, let us compare them with 3 to 5 years annualized returns.
| Pension Fund | 1 Yr | 3 Yr | 5 Yr | 10 Yr |
|---|---|---|---|---|
| HDFC Pension | 7% | 10% | 9% | NA |
| LIC Pension | 6% | 11% | 8% | NA |
| ICICI Pru. Pension Fund | 6% | 10% | 8% | 10% |
| SBI Pension Fund | 5% | 9% | 8% | 9% |
| UTI Retirement Solutionns | 6% | 9% | 8% | 9% |
| Kotak Mahindra Pension | 6% | 9% | 8% | 9% |
| Aditya Birla Sun Life Pension | 7% | 10% | NA | NA |
If you observe, HDFC, LIC and ICICI Pru Pension Fund have beaten its peers in 3 to 5 years returns.
6) Tier-II – Scheme G (Government Bonds)
Here are the NPS returns in the last 1 to 10 years. Since 3 NPS fund managers have NPS schemes in < 10 year history, let us compare them with 3 to 5 years annualized returns.
| Pension Fund | 1 Yr | 3 Yr | 5 Yr | 10 Yr |
|---|---|---|---|---|
| LIC Pension | 4% | 10% | 9% | NA |
| HDFC Pension | 4% | 9% | 8% | NA |
| ICICI Pru. Pension Fund | 4% | 9% | 8% | 9% |
| SBI Pension Fund | 4% | 9% | 8% | 9% |
| Kotak Mahindra Pension | 4% | 9% | 8% | 9% |
| UTI Retirement Solutionns | 4% | 9% | 8% | 9% |
| Aditya Birla Sun Life Pension | 4% | 9% | NA | NA |
If you observe, LIC Pension Fund, HDFC Pension Fund and ICICI Pension Fund have beaten its peers in 3 to 5 years returns.
7) NPS – Central Government Plan
Here are the NPS returns in the last 1 to 10 years.
| Pension Fund | 1 Yr | 3 Yr | 5 Yr | 10 Yr |
|---|---|---|---|---|
| UTI Retirement Solutionns | 6% | 10% | 9% | 10% |
| SBI Pension Fund | 6% | 10% | 9% | 10% |
| LIC Pension | 7% | 10% | 9% | 10% |
If you observe almost all 3 NPS fund managers have performed in a similar way where returns ranging between 8.9% to 10.4% in the last 3 to 10 years.
8) NPS – State Government Plan
Here are the NPS returns in the last 1 to 10 years.
| Pension Fund | 1 Yr | 3 Yr | 5 Yr | 10 Yr |
|---|---|---|---|---|
| UTI Retirement Solutions | 6% | 10% | 9% | 10% |
| SBI Pension Fund | 6% | 10% | 9% | 10% |
| LIC Pension | 7% | 10% | 9% | 10% |
If you observe almost all 3 NPS pension fund managers have performed in a similar way where returns ranging between 8.8% to 10.3% in the last 3 to 10 years.
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Which is the best NPS Scheme or NPS Fund Manager in India?
After going through all the above, you might be wondering who is the best NPS fund manager to invest in an NPS scheme in 2022.
For State and Central Government plans, there are only 3 NPS fund managers. Almost all the 3 fund managers i.e. UTI Pension Fund, LIC Pension Fund and SBI Pension Fund have almost similar performance. Subscribers can consider any of the NPS schemes.
For private sector employees, considering equity, corporate bond and government bond schemes performance, HDFC Pension Fund tops the performance followed by ICICI Prudential Pension Fund.
Source: NPS Returns Performance 2022
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Hi Suresh
Which NPS scheme have you invested in ? pls share if you don’t mind
Hello Nanmith, I have invested in HDFC Pension Fund NPS scheme.
Thanks sir. Suppose I invest only 50k per year in NPS tier 1. Assuming I already have utilised 1.5 lakhs in 80C bucket with other investments, now this 50k NPS would fall into 80ccd(1b)?kindly answer
Yes. In total you would get tax benefit of Rs 1.5 Lacs + 50K = Rs 2 Lacs
Dear sir
I have some investment in superannuation fund with LIC from my previous employer my new employer does not have this facility so can I transfer my superannuation fund to my Tier-I NPS ? If yes then pl help with the procedure of online process.
Thanking you.
Yes giridhari, I did this myself an year back. 1) You need to open NPS first. 2) If you did not register NPS yet, you can reach out to payroll/HR and ask them to send you process to open Corp NPS. Reach out to your payroll/HR to transfer superannuation fund to your NPS Tier-1. This cannot be done online as of now. It would take 4-6 weeks time for the entire process. Once transferred, you can view your investments online on NPS NSDL / Kfintech (wherever you opened) website.
Sir,
Article is good.If a persion joins at the age of 61 whether exit is possible at any time ? Pls clarify.
The minimum investment is 1000 in a fin year.the restriction regarding Minimum rs 6000 in a year is revised.
Likewise if the accumulation is less than 5 lakhs 100% withdrawal is permissible on attaining 60 years of age..That you have not mentioned.
Sivasankaran
Hello Sivasankaran,
1) NPS currently allows subscribers to invest up to the age of 75 with an exit option any time after the age of 60 years of age
2) Yes one can withdraw 100% if the accumulated corpus is < 5 Lacs.
For opening an account I have deposited Rs 1000 just two days back. Shall I make contribution of another R’s 49000 before 31 March 2022 to reap the benefit of tax exemption. Or is there any periodicity and limit on amount that shall be deposited. Kindly throw light on the subject doubt
Minimum 1 transaction has to be made in a year. However there is no limit on maximum number of transactions that can be made in a year.
However, my suggestion is just wait and check that your minimum contribution is reflecting in your NPS (as it was your first transaction) a/c and then proceed and invest whatever you want to invest before 31-Mar-22 for tax purpose
On maturity at 60 years, 40% to be used for buy annuity scheme. Can you please explain more on annuity scheme ? Which scheme is best ? Thanks
Hello Sundar, There is no simple answer. Majority of the annuity schemes provide 6% pension on the lumpsum invested. There are plans for single life, joint life, return of lumpsum etc., Depending on the plan taken, the pension income would vary.
Hello Sir,
I have done NPS and selected scheme G ( Government bonds) my question is it right decision taken by me because returns % are less compare to other schemes
Please tell me sir
Returns from Government or corporate bonds would be anyways lower compared to equity. If you can take risk, you can increase asset allocation in equity. Since the amount is for retirement planning, you don’t need to worry about short term stock market fluctuations.
opening of NPS account is extended up to 65 years.
Thanks for pointing the error. It should have been 70 (typo error showing as 60). This was revised last year.
Sir,
We can withdraw 60% at retirement
My query is
When can we withdraw 40% invested to buy Annuity?
Or will it be given as lumpsum amt after death to Nominee
Hello Dr. Satish
1) If subscriber expires before 60 years before taking maturity benefits – Entire amount can be withdrawn by nominee
2) On maturity at 60 years – 60% of total accumulated value can be withdrawn by NPS subscriber and 40% to be used for buy annuity scheme. Based on the annuity plan, the death benefit (if any) would vary
If subscriber dies in between, what are the provisions for nomonee
Hello Punit, In the unfortunate event of a subscriber passing away before the scheme is encashed, his/her nominee/legal heir can withdraw the amount accumulated in the account.
Sir,
Withdrawal from Tier 2 is also after 60 years and subject to 60% commutation and 40% compulsory annuity or there are different rules for Tier-2 account.
For Tier-2 – Withdrawals can be done any time without any limit.
I think the performance figures for Tier 1 and Tier 2 across same category i.e. equity/corporate bonds/government bonds by the same fund manager should remain same. Because the funds are aggregated at the category level and deployed irrespective of Tier 1 or Tier 2.
Minor difference in performance could be in decimal because of accrual of funds of Tier 2 is not certain and therefore deployment is subject to deposit and availability of funds in the account.
Ideally speaking Tier-2 and Tier-2 schemes should delivery similar returns, however I observed there is minor difference e.g. HDFC Pension Tier-1 Scheme-E generated 18.51% returns whereas Tier-2 Scheme-E generated 18.43%