7 Out of 11 NPS Equity Funds Outperform Benchmarks; DSP Leads with 13.75% Returns

The National Pension System (NPS) equity funds, classified under Scheme E, have demonstrated strong performance over various time horizons. Not only have these funds surpassed the Nifty 200 TRI benchmark in the long run (3- and 5-year periods), but several have also outperformed large-cap mutual funds. 

Even in the short term—over a one-year period—7 out of 11 pension equity schemes have delivered better returns than the benchmark and large-cap mutual fund average, according to data as of March 7, 2025.

Performance Highlights of NPS Equity Funds

The newly introduced DSP Pension Fund Managers’ equity scheme emerged as the top performer over the one-year period, delivering 13.75% returns—a significant lead over its closest competitor, UTI Pension Fund, which posted 3.61%. In comparison, the Nifty 200 TRI returned just 1%, while the large-cap mutual fund category average was 1.16%.

At the lower end of the spectrum, Max Life Pension Fund (-0.44%) and SBI Pension Funds (-3.59%) posted negative returns, which dragged down the overall performance of equity pension schemes as a category.

NPS Pension Fund Returns Overview (as of March 7, 2025)

Understanding NPS: A Retirement Investment Avenue

The National Pension System (NPS) is a voluntary retirement savings scheme available to Indian citizens aged between 18 and 70 years. It allows individuals to build a retirement corpus while enjoying tax benefits.

Tax Benefits of NPS Investments

Investing in NPS provides multiple tax advantages under the old tax regime:

• Section 80C: Deduction of up to ₹1.5 lakh on an individual’s own contribution.
• Section 80CCD(1B): Additional deduction of up to ₹50,000 on voluntary contributions.
• Section 80CCD(2): Employer contributions are also tax-deductible. The deduction limit is 10% of basic salary and dearness allowance (DA) under the old tax regime, while it is higher at 14% under the new tax regime.

Withdrawals and Tax Implications at Retirement

Upon reaching the age of 60, an NPS investor can withdraw up to 60% of the corpus as a tax-free lump sum. The remaining 40% must be converted into annuities, and the income from annuities is taxed as per the investor’s applicable income tax slab.

Final Thoughts

NPS equity funds have demonstrated strong potential for long-term growth, with certain pension fund managers delivering superior returns compared to both the Nifty 200 TRI and large-cap mutual funds. While short-term performance can fluctuate, these funds serve as a viable option for retirement-focused investors.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.