Pension Fund Managers Face Scrutiny Over NPS Returns

National Pension System (NPS) Tier I and Tier II Schemes Show Mixed Performance Across Asset Classes

The latest data from the NPS Trust reveals that returns on the National Pension System (NPS) Tier I and Tier II schemes have shown mixed performance across asset classes over one and five-year periods. Equity funds delivered up to 1.89 percent one-year return and up to 12.95 percent five-year return, while corporate bond schemes led the one-year chart with a 3.43 percent return. In contrast, most government bond schemes in the one-year period are priced in negative territory.

According to the NPS data on Tier I and Tier II schemes as of May 22, 2026, equity-oriented schemes continued to reflect volatile market movements, while corporate bond schemes offered relatively steadier returns. Government pension funds performed poorly over the one-year period, with returns ranging from -3.54% to -0.03%.

Pension Fund Performance

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The 10 pension fund managers under the NPS manage subscriber investments across equity, corporate, and government bonds. An analysis of the one and five-year returns of NPS Tier I and Tier II schemes in the E, C, and G categories enables investors to periodically assess performance and adjust their retirement portfolio strategies as required.

A further analysis of the Tier I and Tier II returns of NPS shows that the DSP pension fund recorded the lowest one-year return at -7.89 percent, while the Tata pension fund delivered the highest one-year equity return at 1.89 percent. In corporate schemes, the UTI pension fund recorded the highest one-year return at 3.43 percent. Conversely, the Axis pension fund delivered the lowest one-year government bond return at -3.54 percent.

For a 5-year investment, ICICI has delivered the highest equity return at 12.95 percent, while Axis and DSP pension funds delivered returns of 7.16 percent each on corporate bond schemes. Axis also led the 5-year government bond scheme with a return of 6.54 percent.

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Long-Term Investment Opportunities

Amit H L, Co-founder and CEO of Floatr Wealth, notes that equity returns across several NPS common schemes remained relatively muted over the past year, broadly reflecting the extended consolidation phase witnessed in large-cap equity markets. However, he highlights that for long-term retirement investors contributing regularly through SIP, periods of extended consolidation often present meaningful accumulation opportunities, enabling more units to be acquired at comparatively lower valuations before the next market cycle begins.

Tracking NPS Returns using NAV

In NPS, the Net Asset Value (NAV) measures the per-unit market value of a pension fund owned by the asset management company. When a subscriber invests in a pension fund, they pay the NAV price. When they sell, they receive the NAV. NAV can also be used to calculate a pension fund's returns over a period. For instance, the NAV of Aditya Birla pension fund was priced at Rs 27.9773 on May 22, 2025, and currently stands at Rs 28.1024. Using the formula Return (%) = Ending NAV - Starting NAV ÷ Starting NAV x 100, the one-year return of the Aditya Birla pension fund is calculated as 0.45 percent.

NPS Tier I and Tier II Schemes

The NPS Tier II scheme allows subscribers to invest voluntarily in market-linked instruments with complete flexibility and no lock-in. Unlike the retirement-focused Tier I account, Tier II permits withdrawals at any time without penalty. Subscribers must have a Tier I account, while Tier II is primarily suitable for disciplined investors seeking a low-cost, flexible allocation as a long-term investment alongside their retirement savings.