Best NPS Fund Managers: Which NPS Fund Should You Invest In?

The National Pension Scheme (NPS) is a voluntary, long-term retirement plan administered and regulated by the Pension Fund Regulatory and Development Authority (PFRDA) under the Central Government of India.
 

Individuals in the private and public sectors can partake in this scheme by investing in low-risk equity funds, security funds or alternative investments with good returns. On maturity, they can withdraw a certain lump sum percentage on retirement, and the rest is received as a monthly pension.
 

However, you may be wondering which pension fund manager in NPS is best for you. 
 

Not to worry, we have compiled a list of the best NPS fund managers in India and presented their performance over the years to help you select the right pension fund manager for your portfolio. 

Best NPS Fund Managers In India

There are a total of 10 fund managers to choose from when you are investing in the National Pension Scheme (NPS). 
 

The best NPS pension fund managers for government and non-government sectors in India are:
 

For Both Government and Non-Government Sectors:

• SBI Pension Funds Pvt. Ltd. 

• UTI Retirement Solutions Ltd. 

• LIC Pension Fund Ltd. 
   

For Non-Government Sectors:

• Aditya Birla Sun Life Pension Management Ltd. 

• Axis Pension Fund Management Ltd. 

• HDFC Pension Management Co. Ltd. 

• Max Life Pension Fund Management Ltd. 

• Kotak Mahindra Pension Fund Ltd. 

• Tata Pension Management Ltd. 

• ICICI Prudential Pension Fund Management Co. Ltd.

Best Pension Fund Manager for NPS: Central Government Scheme 2023

Best NPS Fund Managers: Performance for Tier 1 Schemes 2023

Some returns under Tier 1 schemes of Tata Pension Fund, Max Life Pension Fund and Axis Pension Fund are unavailable as they were launched in August 2022, September 2022 and October 2022, respectively.
 

Disclaimer: These scheme return rates were taken on 06/09/2023 at 2:30 p.m. from the Money Control official portal. 
 

Investments in NPS are subject to market risk, and past performance of the mentioned Schemes/Pension Funds does not indicate future performance. We do not guarantee or assure any returns. Changes in Government policies and tax benefits may impact future returns.

Pension Fund Managers for NPS with Highest Tier 1 Equity Fund Returns (Scheme E)

Best NPS Fund Managers: Performance for Tier 2 Schemes 2023

Some returns under Tier 2 schemes of Tata Pension Fund, Max Life Pension Fund and Axis Pension Fund are unavailable as they were launched in August 2022, September 2022 and October 2022, respectively.
 

Disclaimer: These scheme return rates were taken on 06/09/2023 at 2:30 p.m. from the Money Control official portal. 
 

Investments in NPS are subject to market risk, and past performance of the mentioned Schemes/Pension Funds does not indicate future performance. We do not guarantee or assure any returns. Changes in Government policies and tax benefits may impact future returns.

Pension Fund Managers for NPS with Highest Tier 2 Equity Fund Returns (Scheme E)

How to Choose The Best Pension Fund Manager for NPS?

While the NPS scheme allows investors to have different fund managers for their Tier 1 and Tier 2 accounts, they can not have different fund managers for different schemes in the same tier.
 

For example, you cannot have an SBI Pension Fund for government securities, an ICICI Fund for equities, and a Max Life Fund for corporate debt. 
 

If you choose the ICICI Pension Fund - your equity, corporate debt, government securities, and alternative investment funds should all be from ICICI. The same rule applies to other funds as well. 
 

Hence, when selecting a pension fund manager in NPS, you must look at how the pension fund manager performs on a portfolio basis rather than looking at it from an asset basis.

Choosing NPS Fund Managers Based on Your Investor Profile

Investors can be divided into four main types based on how they allocate their funds:

• An Aggressive Investor.

• A Moderate Investor.

• A Conservative Investor.

• A Super-Safe Investor.
   

Based on their profile, here is their asset allocation is split among equities, corporate bonds, and government bonds:

Regardless of what profile you fall under, you should note that NPS interest rates are market-linked. Your interest or return from NPS investments will depend on your contributions and asset allocation. 
 

The historical returns from NPS have been in the range of 12% to 15%. However, it depends on the scheme type. As of September 2023, the current NPS interest rate ranges from 9.00%* to 12.00%* p.a., depending on the type of scheme and investor.
 

Unlike most tax savings schemes, NPS does not offer fixed returns, its returns are market-linked. Also, since the scheme and investment amount vary, the interest rate in NPS has not been set as a definite amount.
 

Overall, it is hard to determine an outright best NPS Fund Manager since all pension fund managers carefully operate around an average.

What NPS Account Type Should You Choose?

When opening an NPS account, you get two investment options: Active Choice and Auto Choice.
 

• Active Choice: For investors who wish to decide their asset mix. In other words, you can choose how your money is invested across available assets, subject to maximum allocation limitations. 
   

• Auto Choice: For passive investors who want an automatic allocation to decide how their money is spread across available asset classes. 
   

  Under this choice, the fund allocation is done on a life-cycle-based approach. It starts with an equity-heavy portfolio that gradually reduces equity allocations as you approach retirement. This optimises returns and cushions you from market volatility. 
   

You can choose among three life cycle choices under auto choice NPS investments: 
 

• Moderate Life Cycle Fund: The default option that caps maximum equity exposure to 50%.

• Aggressive Life Cycle Fund: This takes an aggressive investment approach where maximum equity allocation can go up to 75%.

• Conservative Life Cycle Fund: The maximum equity allocation is capped at 25%.
   

Here is a table illustrating these points on how your funds will be allocated depending on your age:

NPS Auto or Active, Which Is Better?

If you are new to investing and can not decide, we recommend going with the default auto choice, as it has a powerful effect on your NPS investments. 
 

Once you start tracking how your funds get allocated in NPS and their performance, you will gain enough experience to manage the allocation on your own and opt for an active choice. 
 

The NPS scheme allows you to change your fund manager once a year and your investment scheme four times a year. In other words, you can switch from active to auto or vice versa four times a year. 
 

This shift is allowed for investments in NPS Tier 1 (non-government subscribers only) and NPS Tier 2 accounts.

What are Pension Fund Managers in NPS?

Pension fund managers in NPS are similar to mutual fund managers. They invest and maintain the pension funds received from various investors into the 4 asset classes. They also regularly review investments to see if they are performing effectively. 
 

NPS fund managers are paid a fee in exchange for their services - which is determined by the average number of assets they manage. Here are an NPS fund manager's basic duties:
 

• They pool money from investors and invest in various asset classes to generate maximum returns at suitable risks.

• They must invest the received pool of funds according to the Investment Policy and PFRDA Regulations.

• They must regularly evaluate the performance of investments to ensure they are generating optimal returns.

Factors to Consider When Picking the Best NPS Fund Manager

• Risk Tolerance: Your investor profile will largely dictate your fund allocation strategy. Thus, knowing how much risk you can handle can help you select a fund manager that will closely meet your expected risk-reward preference. 

• Past Performance: Checking the NPS fund manager's historical performance over the last few years can help in the decision-making process. You can also select different NPS fund managers for your Tier 1 and Tier 2 accounts. 

• Investment Horizon: This is the length of time you hold your investment portfolio. Since NPS is generally a long-term investment plan, how close you are to retirement will dictate your fixed income ratio vs. equity. Based on this, you can pick your preferred fund manager.

• Investment Goals: NPS is specially designed for retirement planning. Hence, your chosen pension fund manager must align with your investment goals. You can analyse the consistency of returns, Sharpe ratio, rolling returns, and other components the fund manager manages.  

 

Conclusion 

When choosing your NPS fund manager, it is essential to consider your financial goals, risk tolerance level, what type of NPS account (active or auto choice) you want to open, and your chosen NPS fund manager's past performance. 
 

You must also consider how they have performed on a portfolio basis rather than solely focusing on specific asset classes. 
 

Moreover, if you are a new investor, going for an auto-choice NPS account is recommended, as these offer optimal returns while still cushioning you from market volatility. As you gain more experience, an active choice account, where you pick your asset mix, may be better suited. 
 

The NPS is considered one of the best retirement plans in India. Hence, before choosing an NPS fund manager, ensure you implement the stated measures in this blog to ensure you get the highest returns.