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Aided by a strong show from the non-government sector, National Pension System (NPS) assets grew robust 30 percent year-on-year as of March 16 to touch ₹11.56-lakh crore, latest PFRDA data showed.
The overall NPS assets growth has been driven by both buoyant equity markets and widening NPS subscriber base as more working Indians took to retirement planning in a serious manner.
The non government sector — corporates and retail — saw a 41 per cent year on year growth in its NPS assets to ₹ 2.22-lakh crore as of March 16. As many as 8.51 lakh new subscribers — Corporate at 1.29 lakh and all citizen model at 7.23 lakh — have joined NPS so far this fiscal, pension regulator PFRDA’s data showed.
On the other hand, government employees’ assets have recorded 28 percent year-on-year growth at ₹ 8.95 lakh crore as of March 16. The number of new government employees who onboarded NPS till mid March this fiscal stood at near 7 lakh.
Equity bull run
Sriram Iyer, CEO, HDFC Pension, said that the overall growth in AUM has undoubtedly been fuelled by the equity markets. However, NPS as a product is also finding wider acceptance resulting from the heightened awareness campaign through various means run by industry participants and the regulator, he added.
The pace of asset growth has been higher for non-government sector than those seen for government employees due to the higher allocation towards equity amongst the former category of subscribers, Iyer said.
Equity assets constitute around 18 per cent of the overall AUM while for the Retail and Corporate Segment it is relatively higher at around 40-45 per cent of the AUM. “This explains the faster growth in the Retail+Corporate segment”, Iyer noted.
Apart from the growth driven by buoyant equity markets, the overall base of subscribers also continues to grow, albeit at a marginally lower rate compared to the last fiscal year.
Between retail and corporate segment, the sector is expected to add upwards of 7.5 lakh subscribers for this Financial year, he said.
“Growth has ostensibly slowed down in the retail segment given the adoption of new tax regime by a number tax payers thus neutralising the tax benefits that NPS offers”, he said.
In the corporate segment, while new subscriber additions are a tad slower than last year, given that the tax advantage under 80CCD (2) continues in both the new and old tax regime, the number of companies adopting Corporate NPS for its employees continue to witness robust growth, Iyer added.
About 3,000 additional corporates have signed up for Corporate NPS for its employees till February this financial year.
EQUITY RETURNS SIZZLE
Bullish equity markets have helped Pension Funds record a scorching average annual return of 35.33 per cent as of March 16, surpassing Corporate Bonds by over fourfold, and outperforming Government Securities and State Government Schemes, latest PFRDA data showed.
Over the past three years, Pension Funds achieved an average return of 16.63 per cent in equities, with returns since NPS inception coming in at 13.34 per cent for equity investments.
As of March 1 this year, Corporate Bonds recorded annual return of 8.64 per cent, while Government securities saw a return of 10.26 per cent. The annual return from Central and State Government schemes stood at 12.80 and 12.75 per cent, respectively, data showed.
Iyer said that NPS funds under Equity Tier 1 have delivered upwards of 24 per cent in the last 1 year despite the investment universe being largely skewed towards the top 100 stock out of the approved universe of Top 200 stocks on NSE basis market capitalisation.
“While this rally could get tempered, given the long term nature of the NPS product, equity allocation within NPS is likely to deliver meaningful inflation beating returns”, he said.
The close monitoring and allocation to the relatively better managed Top 200 stocks in the universe is likely to also ensure that the risk adjusted returns continue to be superior, Iyer added.
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