Returns on NPS for the year 2010-11

These are returns for the 2010-11 (ending 31st March 2011) in the investments made by Government Employees and other individuals.  The Central Record Keeping Agency (NSDL) has published these figures in its website.

Returns on the investments made by Government Employees:

In respect of Central Government Employees and State Government Employees Scheme CG and SG respectively are applicable. The performance of the three pension fund managers for the central government employees indicate that the returns on subscribers' contributions under NPS ranged between 8% and 16% during 2008-09 and 2010-11. For state government employees the return was as low as 6% in 2009-10 and 10% in 2010-11.

Returns for Individuals other than Government Employees:

NPS subscribers have two investment options. First they have to open a Tier-1 account where the money is locked in and on attaining the specified age an investor can withdraw 40% of the corpus, while the remaining 60% has to be used to purchase a pension plan. There is also a Tier-2 option where funds can be withdrawn whenever an investor wants to.

Further, the Asset Class E, C and G are applicable only to individuals other than Government Employees.

Asset class E (equity market instruments) – The investment in this asset class would be subject to a cap of 50%. This asset class will be invested in index funds that replicate the portfolio of a particular index such as BSE Sensitive index and NSE Nifty 50 index. These schemes invest in securities in the same weightage as comprised in an index.

Asset class C (credit risk bearing fixed income instruments) – This asset class will be invested in the fixed income instruments such as Fixed Deposits of scheduled commercial banks, Credit Rated Public Financial Institutions/PSU Bonds, Municipal Bonds/Infrastructure Bonds etc

Asset class G (Government Securities) – This asset class will be invested in central government bonds and state government bonds.

According to the latest data released by the government in Parliament on Tuesday, return on investment is as low as 1.8% in case of those private sector employees, who opted for investments in government securities, the safest of the categories. At the highest level, schemes in this segment offered 12.5% return for the period 2009-10 to 2010-11.

Corporate bonds, supposed to be second safest instrument after government bonds, offered returns of 4-13% between 2009-10 and 2010-11. This again was due to the erosion in the value of the securities. Although stock market indices have had a roller-coaster ride over the last two years, equities have offered the best return of 8%-26% during this period. Amid fears that people would lose money, the government had capped investment in equities at 50% of the investment that a person makes in NPS.

source: Times of India, NSDL