Best performing NPS funds

A key retirement advice is to start building a well-diversified portfolio across equity and fixed income as early as possible and then let the long-term compounding work for you. With most people preferring to park their money in risk-free options, regular investments in the National Pension Scheme [NPS] gives you access to myriad investment options and pension funds, including HDFC Pension Management, LIC Pension Fund or ICICI Pension Fund.

The largest pension fund, HDFC Pension Management with asset under management [AUM] of ₹22,900 crore in Tier 1 schemes, has outperformed its peers in equity and corporate bond schemes in the three-, five- and seven-year period. In the Scheme G of NPS Tier 1, which invests in government securities, LIC Pension Fund has outshone others in the same time periods.

NPS is an ideal platform for retirement investment due to its flexibility to invest across asset classes and low-cost structure. With permissible equity investment of up to 75%, it helps you earn inflation-beating returns.

A look into the equity portfolio of the three best NPS schemes reveals the similarity of their biggest holdings. HDFC Pension Fund holds RIL [7.84%], Infosys [7.66%] and ICICI Bank [7.41%]. LIC Pension Fund holds RIL [8.95%], followed by IT major Infosys [8.26%] and HDFC Bank [7.51%]. ICICI Pension Fund holds one-fourth of its portfolio in the same stocks as LIC Pension Fund.

The exempt-exempt-exempt [EEE] nature of the product adds to its attractiveness. Subscribers can save tax while investing. The accumulated corpus at the time of retirement is tax-free as well.