Analyzing the expansion of my 14-year-old NPS portfolio


I’ve invested within the Nationwide Pension Scheme (NPS) since eighth March 2010. This can be a efficiency report of how the NPS invested has fared during the last 14+ years. We additionally evaluate the returns with EPF.

Word: Kindly don’t assume that I’m recommending NPS devices. My state of affairs is kind of completely different from most. NPS is a compulsory funding for me and a full alternative for GPF. The asset allocation is 15% fairness and the remainder in gilts (govt bonds). In case you are in a company setup, please recognise that NPS has a lock-in of as much as 60. Most company staff won’t work till that age. When you exit earlier than 60, 80% of your corpus shall be locked into an annuity. So, our advice has all the time been to not spend money on NPS.

Additionally, see:

My NPS corpus is about 30.5% of my fairness MF + shares corpus tagged to retirement. It’s about 20% of my complete retirement portfolio. It has taken a lifetime to scale back the dependence on NPS. For extra particulars, see Fourteen Years of Mutual Fund Investing: My Journey and Classes Realized.

I’ve been a part of the NPS since 2006. Nevertheless, the NPS was not prepared for funding then. Till then, the organisation F&A held the cash with 8% annual curiosity. The primary funding into NPS funds was made on eighth March 2010.

We will monitor the progress from that date. The cash was nearly equally divided among the many three Tier 1 (central govt) schemes provided by UTI, LIC and SBI.

With employer contribution, NPS is among the finest step-up SIPs in a mutual fund. My month-to-month funding right this moment is 5 occasions greater than ten years in the past. That may be a 14.4% year-on-year funding enhance spanning two pay commissions and a promotion. You possibly can see that within the curvature of the whole funding line beneath.

That is the expansion of the NPS portfolio together with complete investments. The XIRR as of nineteenth April 2024 is 9.03%. Not too shabby. Earlier than the speed hikes, it was 10%-ish.

Normalized growth of my NPS investments from Mar 2010 to April 2024
Normalized development of my NPS investments from Mar 2010 to April 2024

In July 2013, the RBI elevated in a single day charges by 2% to cease the autumn of the Rupee. My gilt-heavy NPS portfolio took a mighty tumble.  That is what the NAV appeared like in Oct 2013. My NPS CAGR simply earlier than the autumn was 11% ish; in a single day, it turned 6-ish%, recovering over the following few months. When this occurred, PFRDA realised, “Aisa bhi hota hai! What if this occurs simply earlier than the particular person retires?!” and launched staggered withdrawals.

NPS-central-government-schemes-performance
NPS-central-government-schemes-performance

Annotated lack of acquire within the NPS portfolio.

Total gain or loss in my NPS portfolio from March 2010 to April 2024
Whole acquire or loss in my NPS portfolio from March 2010 to April 2024

NPS vs EPF

This compares the NPS NAV (the SBI central govt fund has been used as a consultant) and the EPF NAV (constructed from annual rate of interest historical past).

Growth of NPS Central Govt Scheme vs EPF from March 2010 to April 2024
Progress of NPS Central Govt Scheme vs EPF from March 2010 to April 2024

On the time of writing, NPS has outperformed EPF, however that will not all the time be true! If I had invested in EPF as an alternative of NPS ten years in the past, the NAV evolution (assuming day by day development = annual curiosity/365) would appear to be this.

Imaginary growth of EPF investment from March 2010 to April 2024
Imaginary development of EPF funding from March 2010 to April 2024

It’s exhausting to beat the non-volatile development of EPF, however it isn’t too shabby for a compulsory funding! The asset allocation of central govt staff can now be modified. I’ve not modified it (and advocate others to not do it too). Utilizing NPS as a pure-debt fund and managing fairness individually is finest (see hyperlinks beneath)

Additionally, see:

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