Aided by a strong response from the non-government sector—individuals and corporate sector categories — the overall assets under management of the market-linked National Pension System (NPS) and Atal Pension Yojana (APY) touched almost ₹9 lakh crore as of March 2023, up 22 per cent on a year-on-year basis, PFRDA data showed.

The overall AUM of ₹8.98 lakh crore as of March 2023 was bolstered by the addition of one million new subscribers in the corporate and All-Citizen model categories during 2022–2023. This is the first time ever that the NPS has seen the addition of a million new subscribers in a fiscal year in the non-government categories, sources said.

Editorial. NPS is catching on and needs greater policy support

The frenetic pace in AUM of NPS can be gauged from the fact that the latest level of near ₹9 lakh crore is over a four-fold increase in the last five years to the level of ₹2.35 lakh crore as of March 2018. The total number of subscribers in the last five years has surged from 2.11 crore to 6.33 crore, PFRDA data showed. 

Increased awareness

Part of the reason for the strong show in NPS in recent years is increased awareness post-Covid-19 pandemic among retail segment to secure their financial future post retirement. Financial security for the family has become a key life goal for millions of Indian middle-class households post-pandemic. 

While the AUM of the corporate model grew 29.4 per cent y-o-y to reach ₹1.17 lakh crore as of March 31, 2023, the growth in the “all-citizens model” was 31 percent year over year at ₹42,623 crore, official data showed. 

This 22 per cent overall growth in AUM for NPS and APY has come despite headwinds such as rising interest rates (the RBI hiked repo rates by 250 basis points in 2022-23), five States expressing intent to move away from NPS to a defined benefit scheme, and a recent budget announcement tweaking the tax breaks for NPS (by bringing an optional new taxation regime that would take away the tax deduction for NPS contributions).

It may be recalled that pension assets (NPS and APY) were growing at a 5-year CAGR of 27–28 per cent. This overall AUM growth of 22 per cent is still good performance and in keeping with the attractiveness of NPS as a long-term retirement planning product, a pension industry expert said. However, going forward, the messaging may have to change, as NPS cannot be sold as an investment product that would help save taxes (now that Section 80C break will not be available for all) but rather a long-term vehicle that will help create a ‘nest egg’ for the golden years of subscribers.

“Despite all challenges like high interest rates and tax breaks getting diluted or taken away, NPS remains the most competitive market-linked long-term product that still delivers average equity returns of about 12 per cent.” another expert said.

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The two-decade-old NPS now manages about ₹9 lakh crore for a 6.32 crore subscriber base, which is quite creditable compared to the ₹11 lakh crore managed by the Employees Provident Fund (EPF) for about 26 crore legacy subscribers.

The strong performance of NPS is also some indication that young investors are showing preference for market-linked investments over fixed-return vehicles.