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

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


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

Do share if you found this useful

Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video!  More than 640 investors and advisors use this!
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 2525 investors and advisors are part of our exclusive Facebook Group! 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 in an exclusive Facebook Group! 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 585 salaried employees, entrepreneurs and financial advisors are part of our exclusive Facebook Group! 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 in an exclusive Facebook Group!   
My 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, if we had to groom one ability in our children that is key not only to money management and investing but for any aspect of life, what would it be? 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 parent’s 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!
Did you know? We have more than 1000+ videos on YouTube to explore! Join our YouTube Community!

Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored three print books, You can be rich too with goal-based investing (CNBC TV18), Gamechanger, Chinchu Gets a Superpower! and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. 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, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
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, 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 199 (instant download)
Free android apps