Does It Really Make A Sense To Invest In NPS Which Has Given An Average Return of 12% In The Last One Year?

Does It Really Make A Sense To Invest In NPS Which Has Given An Average Return of 12% In The Last One Year?

National Pension System (NPS)- The debt schemes of this system have delivered excellent double-digit returns, although the returns from most other fixed income portfolios remain subdued. NPS’s Scheme G tops the rankings with an estimated return of 12 per cent over the last year. NPS ‘Scheme G invests in government bonds and affiliated assets. It is an investment alternative with minimal risk. These returns lure ingenuous investors to invest in such NPS schemes without finding the facts. It is crucial to consider the facts and features of NPS before making an investment decision. It is a retirement plan supported by the government at a low cost. Although NPS was introduced in 2004 to substitute the old pension system for government employees primarily, in 2009 it was extended to all the country’s residents. It is a significant investment for retirement planning because of its low-cost nature and tax flexibility.

How Scheme G of NPS has generated double-digit returns?

Let’s touch up the fundamentals that provide an indirect influence between bond yields and bond prices. When yields fall, the costs of current debt schemes rise, and due to higher interest rates, these securities become more appealing. Which implies, as the yields of securities go lower and vice versa, the NAV of the debt scheme rises. This major assumption describes the double-digit returns over the last year or so in Scheme G of NPS. The 10-year G-Sec index returns decreased from 6.70 per cent to 5.94 per cent, which aided the portfolio of NPS. NPS’s Scheme G offers an average annual return of 12 per cent over the last fiscal year. With 13.43 per cent returns, the HDFC Pension Management Fund has been the star competitor during the last year, surpassed by LIC Pension Fund with 12.49 per cent returns and ICICI Prudential Pension Fund Management with 12.25 per cent returns during the same year. In addition to the NPS government bond scheme, long-term debt mutual funds — gilt funds, long-term debt funds, corporate bond funds, etc.—are now delivering high returns because of the decline in bond levels.

In the future, can we foresee the same returns from NPS schemes?

The returns from NPS are subject to the market basis. In NPS schemes, the yields will be erratic. The returns may be weaker than those presently delivered or even higher. Concentrate on your objective and do not get swept away by the uncertainty of the short term. By looking carefully at the high returns at this stage, do not arbitrarily switch from equity to these debt instruments. The purpose of this fund should be to accumulate for your long-term retirement and hence do not rely only on the returns. NPS provides a variety of investment assets, such as equity, bond funds, government bonds and substitute investment funds. It also makes it easier to invest in an asset class form. When choosing to invest in NPS, aside from analysing the results of different schemes, compare the schemes on the bid with your risk tolerance. NPS is steadily expanding as an investment option. It will eventually enable investors to invest through SIP too. NPS is still looking to carry out, by this fiscal end, an assured return offering.


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