After 12 years of investing in the NPS my return is 8.9%

Published: August 28, 2022 at 6:00 am

I have invested 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 12+ years. We also compare the returns with EPF.

Note: Kindly do not assume that I am recommending NPS instruments. My situation is quite different from most. NPS is a mandatory investment in my case and a full replacement for GPF. If you are in a corporate setup, please recognise that NPS has a lock-in of up to 60. Most corporate employees will not work until that age. If you exit before 60, 80% of your corpus will be locked into an annuity.

So our recommendation has always been not to invest in NPS. If you cannot see that “extra Rs. 50,000 tax saving go “waste”, then at least ensure you invest a lot more elsewhere!

Please note that my NPS corpus is about 49% of my equity MF corpus tagged to retirement. It is about 25% of my total retirement portfolio. It has taken a lifetime to reduce the dependence on NPS. For more details, see Fourteen Years of Mutual Fund Investing: My Journey and lessons learned.

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

Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!

    🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

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

    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 it was ten years ago. That is a 14% 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 26th Aug 2022 is 8.95% (last year, it was 10%-ish, thanks to the rate hikes, the XIRR has dropped).

    Normalised growth of my NPS investments from Mar 2010 to Aug 2022
    Normalised growth of my NPS investments from Mar 2010 to Aug 2022

    Notice the fall in July 2013. That is when RBI has to increase overnight rates by 2% to stop the fall of the Rupee. My gilt-heavy NPS portfolio took a mighty tumble. Again it has suffered for the last few months.

    This is what 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.

    Total gain or loss in my NPS portfolio from March 2010 to Aug 2022
    Total gain or loss in my NPS portfolio from March 2010 to Aug 2022


    NPS vs EPF

    This compares 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 Aug 2022
    Growth of NPS Central Govt Scheme vs EPF from March 2010 to Aug 2022

    At the time of writing, NPS has outperformed EPF, but that may not always be the case! 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.

    Imaginary growth of EPF investment from March 2010 to Aug 2022
    Imaginary growth of EPF investment from March 2010 to Aug 2022

    It is hard to beat the non-volatile growth of EPF but not too shabby for a mandatory investment! The asset allocation of central govt employees can now be modified. I have not changed it (and recommend others not to do it too). Using NPS as a pure-debt fund and managing equity separately is best (see links below)

    Also read:

    Do share this article with your friends using the buttons below.

    🔥Enjoy massive discounts on our courses and robo-advisory tool! 🔥
    Use our Robo-advisory Excel Tool for a start-to-finish financial plan! More than 1000 investors and advisors use this!
    New Tool! => Track your mutual funds and stocks investments with this Google Sheet!
    • Follow us on Google News.
    • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
    • Join our YouTube Community and explore more than 1000 videos!
    • Have a question? Subscribe to our newsletter with this form.
    • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

    Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!

      Explore the site! Search among our 2000+ articles for information and insight!

      About The Author

      Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
      Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
      Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
      Our new book for kids: “Chinchu gets a superpower!” is now available!
      Both boy and girl version covers of Chinchu gets a superpower
      Both boy and girl version covers of Chinchu gets a superpower.
      Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
      Feedback from a young reader after reading Chinchu gets a Superpower (small version)
      Feedback from a young reader after reading Chinchu gets a Superpower!
      Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
      Buy the book: Chinchu gets a superpower for your child!
      How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
      Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
      We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
      About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
      Connect with us on social media
      Our publications

      You Can Be Rich Too with Goal-Based Investing

      You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
      Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

      Your Ultimate Guide to Travel

      Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)