WHY NPS SHOULD BE OPPOSED IN GOVERNMENT SECTOR

WHY NPS SHOULD BE OPPOSED IN GOVERNMENT SECTOR

PART – 2

RETURNS

The downturn in gilts has been the undoing for most funds.

After posting spectacular near doubledigit returns a year ago, the NPS disappointed government employees in 2013-14. The average returns for Central government employees were 5.37%, while state government employees earned 4.95% on their NPS contributions during the financial year. The calculation is based on SIP returns on monthly contributions from April 2013 till March 2014. The poor show during 2013-14 has dragged down the long-term SIP returns of the NPS below that of the Provident Fund.

NPS votaries have often argued that stock investments give the scheme a distinct advantage over the 100% debt-based EPF. The NPS funds for government employees can invest up to 15% in stocks, but the pension funds largely shied from stocks. As on 30 November 2013, the Central government scheme of SBI Pension Fund had only 7.15% of its corpus in stocks, while the fund managed by UTI Retirement Solutions invested only 7.72% in equities.

A higher allocation to stocks would have helped shore up returns because the Nifty rose 18.4% during 2013-14. Aggressive investors in the NPS for the general public have made good gains in the past one year. Though the allocation to equities can’t exceed 50%, the rise of the stock market pushed up their returns. But the long-term average is not very attractive.

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