In Summary: Over 200 equities mutual funds were outperformed by NPS programs in terms of average returns over the previous year, with Tata Pension Management leading the way. Experts warn that comparing the two in a single year could not provide enough information to make wise financial choices. NPS is still a good choice for retirement.
In the past year, about 201 mutual funds have provided returns that are lower than the average return provided by NPS programs. Around 440 equities mutual funds were available throughout the specified time period, and 239 of them produced returns that were higher than the average of NPS schemes.Over the past year, NPS schemes have yielded an average return of approximately 35.81%. The NPS scheme Tata Pension Management provided the highest return in the previous year, averaging 41.02%, followed by UTI Pension Fund, which returned 39.37% within the same time frame.
NPS Programs: ICICI Prudential Pension Fund Management’s one-year scorecard showed a 37.47% return over that time. SBI Pension Funds had the lowest return throughout the specified period, coming in at about 31.91%.
The crucial question at hand is how NPS plans have performed over the past 12 months. It’s critical to recognize that returns on asset classes are not uniform when examining them. Not every property in real estate, for instance, will perform better than the real estate index. Hence, it is necessary to consider the index/benchmark results while evaluating, say, mutual funds. These benchmarks act as a yardstick for gauging a fund’s performance in relation to the overall market or its particular industry. The performance of a scheme is depicted more accurately thanks to this.
Furthermore, there are thousands of mutual fund schemes on the market, each with a different time horizon and risk profile. It’s crucial to understand that comparing the returns of mutual fund schemes and NPS schemes over the course of a year could not give investors all the information they need to make an informed choice.
The finance minister raised the tax deduction cap on employers’ NPS contributions from 10% to 14% of base pay in the most recent budget statement. Under the new tax system, this action has resulted in significant financial benefits.
What should investors do now that the tax benefits for NPS schemes have increased? Do they need to increase their NPS allotment?
According to Priti Rathi Gupta, NPS is one of the retirement investing alternatives. Investors can diversify their holdings among a variety of investment options, including as mutual funds, gold, fixed-income instruments, etc., to control risks, liquidity, and flexibility. NPS is a defined contribution plan that is connected to the market and aids with retirement savings.
The plan is straightforward, optional, transportable, and adaptable. It is among the most effective strategies for increasing retirement income and reducing taxes. According to the NPS Trust website, it enables you to strategically save systematic funds in order to prepare for a financially comfortable retirement.
Mutual funds assist investors in planning for a variety of financial objectives, while NPS is concentrated on retirement savings. The NPS plan features limitations on withdrawals and a 60-year maturity period. More freedom is available with mutual funds, and ELSS mutual funds have a three-year lock-in. A minimum lock-in period applies to these funds among the many Section 80C tax-saving choices.
(Disclaimer: The experts’ views, opinions, suggestions, and recommendations are entirely their own. The opinions expressed here are not those of Investcorpus.)
