National Pension System: Top NPS Schemes with Over 15% Returns in 1 year

The National Pension System (NPS) stands as one of the most popular retirement plans for most people today. It is available for both salaried and self-employed individuals looking to build a significant amount of funds for retirement in order to secure their financial future. But whats more exciting is that some NPS schemes have generated over 15% returns in the past year, making it a smart option for long-term wealth accumulation. Read this blog to explore some of the top NPS schemes that have delivered up to 15% returns in the past year.

Understanding NPS

The NPS scheme is a government-supported retirement savings scheme which comes under the Pension Fund Regulatory and Development Authority (PFRDA). Under this scheme, all Indian citizens (including NRIs) falling between the ages of 18 to 70 years can invest small amounts regularly and build a large retirement corpus over time. The scheme is designed in such a way that you get a monthly pension after retirement and a lump sum withdrawal facility at maturity.

Types of Investment Approaches in NPS

NPS offers two main investment approaches:

1. Active Choice

In Active Choice, you can decide how to split your money between different asset classes:

• Equity (E): It can be allocated up to 75% of your total contribution.

• Corporate Bonds (C) and Government Securities (G): It can be allocated up to 100%.

• Alternative Investment Funds (A): It can be allocated up to 5%.

This option gives you the flexibility to decide your risk and return balance.

2. Auto Choice

Auto Choice is for those who prefer a simple, hands-off investment style. Here, your funds are automatically distributed based on your age. Younger investors have higher equity exposure, which slowly reduces with age and moves towards safer bonds and government securities. This is great for investors who want to avoid market timing and portfolio management.

NPS Performance: 15%+ Returns in 1 Year

Some NPS funds have delivered outstanding returns in the past year, crossing the 15% mark. This is impressive, especially for a retirement-oriented scheme. Here are some of the top-performing Tier I equity schemes as per recent data (as of Jan 2025):

• ICICI Prudential Pension Fund Scheme A Tier I

This scheme has offered a 1-year return of 14.62%. Over 3 years, it has given a return of 7.50%, and over 5 years, it has delivered 8.79%. While it falls slightly short of the 15% mark in the 1-year bracket, its consistent performance makes it a strong contender. It offers a balanced investment approach with exposure to both equity and debt, ideal for those who prefer moderate risk and steady growth in their NPS investments.

• DSP Pension Fund Managers Private Limited Scheme E Tier II

This scheme has shown the highest 1-year return among the listed options, with a growth of 21.53%. Being a Tier II scheme, it provides more flexibility in terms of withdrawal but does not offer NPS tax benefits. It is suitable for individuals who are comfortable with equity investments and want faster growth of their retirement corpus.

• DSP Pension Fund Managers Private Limited Scheme E Tier I

This scheme is more suited for long-term retirement planning and offers tax benefits under Section 80CCD(1B). It delivered a strong 1-year return of 19.46%. Like its Tier II counterpart, this fund invests largely in equity, making it a good option for those willing to take more risk for higher returns.

• UTI Pension Fund Scheme A Tier I

This scheme has consistently performed well, showing a 1-year return of 16.72%. Over a 3-year period, it has given a return of 8.63%, and over 5 years, it has delivered 7.78%. This fund balances equity with fixed-income instruments, which helps manage risks better. It is suitable for investors looking for a mix of safety and growth in their NPS portfolio.

• Tata Pension Management Private Limited Scheme A Tier I

This scheme has returned 15.40% over the past year. Although data for the 3-year and 5-year performance is not yet available, the fund is gaining popularity for its short-term performance. It may be a good choice for investors who are open to trying a newer fund with promising growth potential.

Why Choose NPS for Retirement?

Here are some reasons why NPS is becoming a favourite for retirement planning:

1. Tax Benefits: You can enjoy NPS tax benefit up to ?1.5 lakh deduction under Section 80C and additional ?50,000 under Section 80CCD(1B).

2. Low Charges: With NPS, the fund management charges are among the lowest in the industry.

3. Flexible Investment: You can start NPS with as little as ?500. It also allows you to increase contributions anytime.

4. Choice of Fund Managers: You can choose or change fund managers based on performance.

5. Partial Withdrawal: NPS allows partial withdrawals after 3 years for specific needs like education, marriage, or house purchase.

Conclusion

NPS is more than just a pension plan, its a long-term investment solution designed to give you peace of mind during your retirement years. With top-performing schemes delivering over 15% returns in a year and steady growth in private participation, now is a good time to consider starting or increasing your NPS contributions.

By investing early and consistently, even small monthly amounts can grow into a massive retirement fund. Use the NPS pension calculator, pick the right investment approach, and build your path to a financially secure future.