Ten years of investing in the NPS: Performance report

After ten years of investing in NPS (tier 1, central govt scheme) this is how my investments have fared since March 2010.

Published: March 18, 2020 at 11:17 am

Last Updated on

This is a performance report of my (mandatory) investments in the National Pension Scheme (NPS) Tier 1 (Central Govt) scheme from March 8th 2010.

I have been part of the NPS since 2006. However, the NPS was not ready for investment then. Until it was, the organisations 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 rest 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 4 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.

This is the growth of the NPS portfolio along with total investments. The XIRR as on 17th March 2020 is 8.99%.

normalised growth of my NPS investments from Mar 2010 to Mar 2020
normalised growth of my NPS investments from Mar 2010 to Mar 2020

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.

NPS-central-government-schemes-performanceThis is the cumulative gain so far. Notice the recent fall.

Total gain or loss in my NPS portfolio
Total gain or loss in my NPS portfolio

NPS vs EPF

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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.

Growth of NPS Central Govt Scheme vs EPF from March 2010 to March 2020
Growth of NPS Central Govt Scheme vs EPF from March 2010 to March 2020

The growth of the investments would look like this. The EPF XIRR would be 8.7%

Imaginary growth of EPF investment since March 2010
Imaginary growth of EPF investment since March 2010

So far so good for 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.

Cautionary note: Kindly do not assume that I am recommending NPS instruments. My situation is quite different than most. If you are in a corporate set up, 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.

NPS resources:

EPF vs NPS: Should you shift to NPS because the govt wants you to?

Do Not Invest Rs. 50,000 in NPS for additional tax saving benefit in 2020! Most of us need to invest an amount = monthly expenses for retirement. So this 50K a year is peanuts you should not fret about.

NPS has EEE (tax-free) Status! Here is why you should still not invest

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7 Comments

  1. Let him enjoy investing in NPS. How much percentage it may be, I always prefer Old Pension scheme.

    1. As much as you prefer the old pension scheme, the taxpayer who is funding your pension doesnt like it one bit.

  2. Sir, How can I track my NPS portfoilio growth. Where do we get the data from? In my NPS login, I dont see such graphs. Pleas guide.

  3. Hi. Can you let me know how have you prepared the graphs. I don’t see such option when i log on to nsdl website in my account.

  4. Hi. How can I prepare such graphs for my own investment. No such data is available when I log into my account

  5. Hi Sir,

    I’ve just started following your page recently. I understand that NPS is not a suitable option for all (Mainly for the long lock-in period).

    I’ve corporate NPS option in my office. How about having corporate NPS as part of debt allocation in retirement portfolio? Can you please explain with numbers if this option can be availed (Given the tax benefits – Both 50,000 and Additional Tax Benefit u/s 80CCD (2) Employer’s NPS contribution up to 10% of salary without any monetary limit) ? Should I still stay away from NPS?

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