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National Pension Scheme gives mixed bag of returns

In a year when Employees’ Provident Fund gave a 9.5 per cent return and an over 8 per cent inflation rate ate into much of people’s income.

Written by Surabhi | New Delhi |
May 28, 2011 1:37:33 am

In a year when Employees’ Provident Fund gave a 9.5 per cent return and an over 8 per cent inflation rate ate into much of people’s income,the New Pension Scheme gave a mixed bag of results. Rising interest rates and volatile stock markets have impacted its returns in 2010-11 but,since inception,the NPS has managed to do better.

The performance review of fund managers for 2010-11 by the Pension Fund Regulatory and Development Authority has revealed that NPS for private citizens has managed to give higher returns than NPS for government employees.

Central government employees in NPS earned a return of 8.05 per cent to 8.45 per cent,much below the weighted average of 9.7 per cent in 2009-10. While UTI gave the highest return of 8.45 per cent,SBI gave the lowest return of 8.05 per cent. However,returns for state government employees in NPS was much higher,which ranged between 11.34 per cent and 9.88 per cent.

“It is about timing your investments as well as exposure to instruments,” said a PFRDA official. Central government employees who joined the service after 2004 are mandated to be part of NPS,which allows up to 15 per cent of the total corpus to be invested in equities,while the rest in corporate debt and government securities.

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Private citizens,who were allowed to join the scheme from May 2009 can invest 50 per cent of their portfolio in equities and the rest in government securities and corporate bonds via one of the six fund managers — UTI Retirement Solutions,SBI,ICICI Prudential Life Insurance,Reliance Capital,IDFC AMC and Kotak Mahindra AMC.

Surprisingly,it is not equities but corporate bonds that was the top performer in the past one year.

“Equities have been the most volatile in the past one year,so corporate bonds and G-secs have given a higher return,” said Balram Bhagat,CEO,UTI Retirement Solutions,which was the top performing fund manager for NPS for central government,state government and the low cost NPS Lite.

The fund managers gave returns between 8.05 per cent (SBI) to 11.89 per cent (Kotak) for equities,which was a tad higher than the average return of 11.14 per cent from Nifty and 10.94 per cent from the Sensex. Equities as a class of investment,however,has given as high as a 17.85 per cent (ICICI) return since NPS was launched two years ago.

However,the usually staid and low-risk,low-return bonds and securities proved to be the dark horse,although PFRDA officials said that high interest rate regime has hit bond yields. Corporate bond yielded returns varying between 12.66 per cent (SBI) and 6.26 per cent (IDFC). G-secs have also given handsome returns. While UTI gave 12.52 percent,SBI gave 12.25 per cent. The lowest performer was IDFC with a return of 6.97 per cent in 2010-11.

PFRDA officials however cautioned that returns would be higher over a period of time as NPS corpus grows. The total corpus for central government employees is Rs 6,400 crore and for those of state is Rs 1,200 crore. The private sector contributed Rs 80 crore to the scheme.

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First published on: 28-05-2011 at 01:37:33 am

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