It’s a David versus Goliath situation. HDFC Top 200 scheme has an AUM of Rs 12000 crore and is recommended by all media/experts/advisors. On the other hand, NPS (New Pension Scheme) is a government sponsored scheme and nobody really knows about NPS. Though NPS has over 38 lakh subscribers, they are mostly government servants whose retirement funds are compulsorily managed by the NPS Fund Managers.
Let us see some NAV data for the two schemes (HDFC Top 200 Growth Scheme & NPS Scheme by SBI for Government employees) over the last 4 years.
| Date | HDFC Top 200 | NPS (SBI Central Govt.) |
| 01-Jan 2010 | 181.43 | 12.56 |
| 01-Jan-2011 | 226.59 | 13.73 |
| 01-Jan 2012 | 171.30 | 14.17 |
| 01-Jan 2013 | 228.94 | 16.20 |
While the absolute return for HDFC Top 200 Growth scheme is 26.2% over 3 years with a CAGR of 8.7%, the return from SBI Central Government scheme is 28.9% and a CAGR of 9.6%. Read more about NPS
Though NPS is the cheapest financial product in the world, has good returns and tax benefits also thrown in, it is hardly being bought by people. The reason is the lack of a proper distribution system as well as the general apathy on the part of the administrators. You just go to PFRDA site to see what you can learn from the site. It is written in official language that is incomrehensible to most people.
The National Pension System (NPS), launched by the Pension Fund Regulatory & Development Authority (PFRDA), is based on the world’s best practices in the pension sector. While saving for a long-term goal such as retirement, the cost matters a lot. Over 35-40 years, the charges can shave off a significant amount from the corpus. The NPS charges fund management fees of 0.0102% for the government employees and there’s a ceiling of 0.25% for the private sector.
The NPS, once you do a bit of research, is a well-regulated, transparent and flexible scheme. It has laid down prudent investing norms for fund managers. The scheme offers complete flexibility. The investor decides the percentage of the corpus that goes into equity, corporate bonds and government securities, with the only limitation being the 50% cap on exposure to equity. One of the most outstanding features of the NPS is the ‘lifecycle fund’. It is meant for those who are not financially aware or can’t manage their asset allocation themselves. It is also the default option for someone who has not indicated the desired allocation for his investments.
Another unique feature of the NPS is the tax benefit it offers under the newly added Section 80 CCD(2).
However, the NPS Trust whose job is to take care of the assets and funds under the National Pension System (NPS) in the interest of the beneficiaries (subscribers), do not have a website of their own. The Central Recordkeeping Agency (CRA) does have the latest NAVs of the NPS schemes available and prompts you to go to individual Fund Managers’ websites for historical NAVs.
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Very good guidance for every indian investors 2 avail huge benefit in the long run. Want 2 know more in future.
Please guide about TIER1 as well as TIER2 and how investors ( Govt servant who have no PF) may invest their valuable money in those scheme that they will be a financially sound position after retirement.
You may like to read more about NPS here: http://rupeemanager.com/investing/category/nps/new-pension-scheme
Dear Mr. Ranjan Varma,
I really liked your analysis. Everybody should endeavor to have some exposure to NPS Tier-I account. It is less costly, moderately transparent and good for retirement planning.
However, it should not be compared with HDFC Top 200 (or any other equity diversified fund). Because, these funds invest more than 90-95% in equity shares. While, in case of NPS, you can’t have equity exposure beyond 50% of your total investment.
Also, your comparison of HDFC Top 200 with SBI Central Government Scheme (one of NPS scheme for central govt. employee) is baseless. Because, It invested only upto 10% in equity while rest in debt. (Check 1st page – http://www.sbipensionfunds.com/docs/Portfoliodetails.pdf).
So Mr. Varma, I would like to have your views if I am wrong somewhere.
Regards
Kunal Jain
Associate Analyst
Value Research
Yes, Kunal, you are right. Comparisons are always dangerous. But I wanted to start a debate and thereby make people more aware of the NPS