After 11 years of investing in the NPS (15% equity + 85% bonds) my return is 10%

Published: September 18, 2021 at 7:45 am

I have been investing in the National Pension Scheme (NPS) since 8th March 2010. This is a performance report of how the NPS invested has fared over the last 11+ years. We also compare the returns with EPF.

I have been part of the NPS since 2006. However, the NPS was not ready for investment then. Until it was, the organisation F&A O held the money with 8% annual interest. The first investment into NPS funds was made on 8th March 2010.

We shall track the progress from that date. The money was almost equally divided among the three Tier 1 (central govt) schemes from UTI, LIC and SBI. The asset allocation was 15% equity and the rest 85% in bonds (most gilts, see effects of that below).

NPS with employer contribution is one of the best step-up SIPs into a mutual fund. My monthly investment today is five times more than what it was ten years ago. That is a 15% year on year increase in investments spanning two pay commissions and promotion. You can see that in the curvature of the total investment line below.

This is the growth of the NPS portfolio along with total investments. The XIRR as of 16th Sep 2021 is 10.12%.

Normalised growth of my NPS investments from Mar 2010 to Sep 2021
Normalised growth of my NPS investments from Mar 2010 to Sep 2021

Notice the fall in July 2013. That is when RBI has to increase overnight rates by 2% to stop the fall of the Rupee (same reason why rate cut may not happen now, more on that later). My gilt-heavy NPS portfolio took a mighty tumble.

This is how the NAV looked like in Oct 2013. My NPS CAGR just before the fall was 11% ish, and overnight it became 6-ish%, recovering over the next few months. When this occurred, PFRDA realised, “Aisa bhi hota hai! What if this happens just before the person retires?!” and introduced staggered withdrawals.

Also, notice how the corpus reacted to the March 2021 crash. That is a combination of the 15% equity and gilts.


This is the cumulative gain so far. Unlike my MF retirement corpus, it has been a steady accumulation of gains. See: How my retirement portfolio has performed in 2020: personal finance audit.Total gain or loss in my NPS portfolio from March 20210 to Sep 2021

Total gain or loss in my NPS portfolio from March 2010 to Sep 2021


This is a comparison of the NPS NAV (the SBI central govt fund has been used as a representative) and the EPF NAV (constructed from annual interest rate history).

Growth of NPS Central Govt Scheme vs EPF from March 2010 to Sep 2021
Growth of NPS Central Govt Scheme vs EPF from March 2010 to Sep 2021

If I had invested in EPF instead of NPS ten years ago, the NAV evolution (assuming daily growth = annual interest/365) would look like this. The EPF return would be about 8% (this is only a crude approximation so don’t get worked up).

Imaginary growth of EPF investment since March 2010 to Sep 2021
Imaginary growth of EPF investment from March 2010 to Sep 2021

So far, so good for a mandatory investment! Although the asset allocation of central govt employees can be modified, I have not done it so far (and recommend others not to do it). It is best to use NPS as a pure-debt fund and manage equity separately (see why below).

Cautionary note: Kindly do not assume that I am recommending NPS instruments. My situation is quite different from most. If you are in a corporate setup, please recognise that NPS has a lock-in up to 60. Most corporates employees will not work until that age. If you exit before 60, 80% of your corpus will be locked into an annuity. So do not invest in NPS.

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