Equity investments under the National Pension System (NPS) have generated tremendous returns for investors. Scheme G of the NPS Tier II Account has produced returns of up to 19 percent over the last year. The sudden uptick in the equity market has also boosted long-term yields. The maximum five return provided by the HDFC Pension Fund in NPS Scheme E was 16%. Aditya Birla Sun Life Pension Fund paid the highest annual return of 18.66 per cent under Scheme E of the NPS Tier II Account, led by the HDFC Pension Fund (18.64 per cent) and ICICI Prudential Pension Fund (17.92 per cent).
Tier II Account in the National Pension System (NPS) is an add-on account that allows you the ability to participate and withdraw from the different plans offered in the NPS without any exit charges. Whereas the NPS Tier I account has a lock-in until 60 years of your age unless you prolong it, there is no lock-in time for the Tier II account. Finance analysts agree that investors can use the NPS Tier II Account as an alternative to a bank account of the bank. Equity Scheme under the Tier I NPS Account produced comparable returns. Investment analysts expect big NPS changes in the budget to make life much easier for the investors.
The NPS Tier-II tax-saver scheme proposed in Budget 2020 for central government employees has a lock-in duration of only 3 years and a fixed asset distribution of 10-25% for equities and the remainder for debt securities. This year’s budget must open this tax-saving initiative to self-employed and salaried professionals working for state governments and the private sector employees. This will provide them with the alternative of saving taxes under Section 80C by participating in a debt-oriented method, particularly in overvalued equity markets.