Private sector fuels NPS surge with 41% Jump in AUM as of Sept 15

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The private sector’s growing voluntary interest in the National Pension System (NPS) continues to remain robust, reflected in a significant 41 per cent year-on-year surge in assets under management (AUM), which reached ₹2.66 lakh crore as of September 15. 

The number of NPS subscribers in the non-government sector (private sector) also saw impressive growth, with a 20 per cent year-on-year increase to 59 lakh, according to the latest data from the Pension Fund Regulatory and Development Authority (PFRDA).

Retirement choice

The surge in their NPS assets highlights the rising appeal of NPS as a preferred retirement savings vehicle, say pension industry observers.

This steady increase in participation underscores the private sector’s ongoing recognition of NPS as a flexible, cost-effective, and tax-efficient solution for long-term financial planning, they added.

Asset Distribution

Corporate sector employees accounted for  ₹1.96 lakh crore in AUM, the ‘All Citizen Model’ (basically individuals) held assets to the tune of ₹68,591 crore. The number of subscribers in the corporate sector (employees of companies who have signed up) stood at 21 lakh, while there are 38 lakh subscribers in the ‘All Citizen Model’.

The latest PFRDA numbers come on the heels of Finance and Corporate Affairs Minister Nirmala Sitharaman’s recent observation that private sector NPS has grown much faster between March 2020 to March 2024 at 25 per cent compared to 8 per cent growth seen in the government sector.

“Private sector employees have found NPS to be an attractive proposition and therefore you see such growth”, Sitharaman had said at the recent launch event of NPS Vatsalya.

One of the key attractions for this remarkable uptake from the private sector in recent years is the “flexibility” that NPS offers in the choice of investment pattern for such subscribers.

Unlike NPS for the government sector, the scheme for the non-government sector (all citizens and corporate NPS) allows contributors to choose their asset allocation between equity, government bonds, corporate bonds, and alternative investments, depending on their risk appetite. 

This freedom appeals to a diverse range of private sector employees, from young professionals looking to maximise equity returns to risk-averse older employees preferring safer options. This flexibility also aligns with the changing financial mindset, as individuals increasingly seek personalised investment choices.

Moreover, NPS stands out for its “cost-effectiveness”. With a low fund management fee of around 0.09 per cent, it is one of the most economical long-term savings instruments in India. 

In comparison to other retirement schemes, such as mutual funds or Employee Provident Fund (EPF), the lower costs of NPS make it highly attractive to both employers and employees in the private sector. For employers, offering NPS as part of a retirement benefits package enhances the company’s appeal to top talent, while employees gain access to a tax-efficient, low-cost retirement vehicle, corporate observers said.

The NPS scheme has generated competitive returns since its inception. For the government sector, NPS has given an average return of 9.5 per cent since its inception. For the non-government sector, the equity scheme has given a return of 14 per cent, corporate debt 9.1 per cent and government securities 8.8 per cent. 

In the last one year, riding on buoyant equity markets, the NPS monies parked in pure Equities have given a 33.98 per cent return. This was much higher than the 12.62 per cent in the central government scheme and 12.71 per cent in the State government scheme. The average return generated by Pension Funds for Atal Pension Yojana in the last one year stood at 12.68 per cent, while the return was 9.29 per cent since inception.

OVERALL AUM

Meanwhile, the overall NPS assets under management (both government and non-government together) as of September 15 grew 29.42 per cent to ₹ 13. 23 lakh crore, the latest PFRDA data showed. India has 7.77 crore NPS and APY subscribers with government sector subscribers for NPS at 94 lakh.