The news and views of Central Government Employees of Karnataka State
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Sunday, September 15, 2013
NPS for CG Employees returns worst hit
As stocks tumble and bonds recede, NPS funds have churned out losses in the past year and given insipid returns in the long term
NPS investors, including the 30 lakh central and state government
employees, who are compulsorily a part of the scheme, are SIP investors
and their returns should be calculated accordingly. We looked at the SIP
returns of NPS funds in the past year and found that most of them were
in the red.
NPS funds for government employees have, on an average, lost 2.45% in
the past year. However, you can't blame the downturn in the equity
market. Most of the losses are due to the steep 12-15% fall in
government bond prices in the past three months. The NPS funds for
government employees are allowed to invest up to 15% of their corpus in
equities, but no fund has hit that ceiling.
SBI Pension Fund, the worst performing fund for government employees,
had only 6.83% of its corpus in stocks as on 30 June 2013. The UTI
Retirement Solutions had only 7.75% in stocks as on 28 March 2013. Both
the schemes had almost 50% in government bonds, most of them long-term
instruments. The long-term bonds declined steeply in July-August, when
the RBI introduced measures to stabilise the rupee.
is not clear how much the investors have lost due to the equity
exposure or allocation to bonds over the past year because the
investment mix keeps changing. Besides, not all pension funds have
disclosed the portfolios of the schemes they run.
the returns of the NPS schemes for the general public offer some clues
on how investments have performed in the last one year. The G class
funds, which invest only in government bonds, have generated very poor
returns (see table).
Far from cushioning the portfolio against volatility, the government
bonds have infused greater risk in the portfolios. The gilt funds of
only two pension fund managers, Kotak Pension Fund and ICICI Prudential
Pension Fund, performed better than their equity funds. The SBI Pension
Fund's gilt fund has been the worst performer in the past year.
could say that one year is too short a duration for judging a scheme in
which one has invested for the long term, possibly 20-25 years.
However, the downtrend in stocks and bonds has also impacted the
long-term returns of the NPS schemes. Though the historical NAV data for
all pension fund managers is not available, we managed to get it for
UTI Retirement Solutions.
past fiveyear SIP returns of the pension scheme for central government
employees is 6.34%. The 3-year and 4-year returns of the two other
pension fund managers (see graphic) are also far below the 8.67% that the Employee Provident Fund has offered.