The National Pension System (NPS) has long been synonymous with tax-saving benefits. However, a recent conversation with Deepak Mohanty, the Chairperson of the Pension Fund Regulatory and Development Authority (PFRDA), has shed light on reasons why NPS should be considered far beyond its role as a mere tax-saving investment.
While talking to CNBC-TV18's Shivani Bazaz, Mohanty said pension products are meant for pension and should be looked at like that.
"It should be looked at for its merits," he said.
While tax incentives serve as an attractive feature, the core purpose of pension products, including NPS, is to fulfil the requirement of ensuring financial well-being during one's retirement years.
One of the standout features that Mohanty highlighted is the track record of NPS equity, delivering 13% return since its inception.
This performance positions NPS not only as a tax-saving instrument but as a vehicle for wealth creation, capital appreciation, and sustained financial growth over the long term.
Moreover, NPS offers a diverse range of investment options, allowing subscribers to tailor their portfolios according to their risk tolerance, financial goals, and time horizon, financial experts say.
Beyond the immediate tax benefits, the NPS provides a disciplined and structured approach to retirement planning.
Coupled with the power of compounding, it enables subscribers to accumulate substantial wealth over the course of their working years.
Significantly, while investors can enjoy income tax exemption on NPS investments up to ₹50,000 under Section 80CCD, it's crucial to consider some additional factors.
These include the enhanced flexibility to adjust exposure levels, the unique opportunity to invest in equity (a feature not universally available in all retirement tools), and the advantages of a cost-effective and efficiently managed product.
Here's a look at top performing NPS fund managers in 2023 (state government schemes):
| Pension Fund Managers | SBI Pension Fund | LIC Pension Fund | UTI Retirement Solutions | Benchmark Return |
|---|
| Net Asset Value (NAV)(As of 15th Dec 2023) | 36.1765 | 36.5819 | 36.3304 | - |
| Returns | 1-year | 9.11% | 9.24% | 9.13% | 9.33% |
| 3-year | 6.59% | 6.88% | 6.74% | 6.84% |
| 5-year | 9.03% | 9.02% | 9.01% | 9.38% |
| 7-year | 8.11% | 8.13% | 8.17% | 8.31% |
| 10-year | 9.95% | 9.83% | 9.83% | 9.93% |
| Since Inception | 9.28% | 9.37% | 9.32% | - |
(Source: Cleartax)
The total subscriber base has reached 51.8 lakh, while the assets under management (AUM) has surged to₹2.09 lakh crore as of January 13, 2024.
The PFRDA has recently provided detailed insights into the subscriber base, indicating a 16% increase in corporate subscribers, reaching 18.94 lakh. The AUM for corporate subscribers has seen 38% growth, now standing at ₹1.55 lakh crores year-on-year (YoY).
Moreover, all citizen subscribers have seen a rise of 22%, reaching 32.86 lakh, with their AUM surging by 38% to reach 0.54 lakh crores YoY.
(Edited by : Shoma Bhattacharjee)
