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NPS trumps EPF in returns game

The National Pension System has given returns ranging between 8 and 14 per cent in 2012-13.

Written by Surabhi | Published: May 16, 2013 3:12:18 am

The National Pension System (NPS) has given returns ranging between 8 and 14 per cent in 2012-13. More,it has improved upon its performance of 2011-12. The range of returns with debt outperforming equity was expected. Pension money invested in corporate debt yielded 14.19 per cent compared with equities which gave 8.38 per cent returns in last fiscal.

The upside is that the returns are more impressive than their peers in every segment. For instance when commercial paper in the market showed a maximum return of 13.61 per cent,the performance of NPS is better.

A release issued by the Pension Fund Regulatory and Development Authority (PFRDA),the regulator notes,“The NPS has delivered double digit returns for the financial year 2012-13 and has evidenced itself as not just being the cheapest retirement product but also as the highest returns generating scheme.”

In contrast,the Employees’ Provident Fund Organisation (EPFO) that manages retirement savings of over 6 crore formal sector workers gave an interest of 8.25 per cent in 2011-12 and 8.5 per cent in 2012-13. Meanwhile,the General Provident Fund that takes care of retirement savings of government employees recruited before 2004 too offered a return of only 8.8 per cent.

This means the later entrants in government service are going to end up with a better harvest than their senior colleagues i.e. those who joined before January 1,2004. The fear propagated by the trade unions and left parties was that the later entrants will be short changed.

The Central government NPS with a corpus of Rs 18,693 crore and 11.5 lakh members gave a consolidated return of 12.39 per cent,for state government pool the return was 13 per cent. It was 9.95 per cent and 8.5 per cent in 2011-12 respectively. (See Chart) The pension scheme for unorganised sector Swavlamban did even better with a return of 13. 4 per cent

The returns make it clear there is little reason for Parliament to delay the passage of the PFRDA bill,since the postponement is only hurting the interests of the working class.

Surabhi is a special correspondent based in New Delhi.

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