New Pension Scheme posts low returns

New Pension Scheme is being promoted as long-term financial instrument for an investors old age security. But the latest data released by Government have presented a dismal picture.

Investment Options in NPS:

  • The NPS subscribers have two investment options. First they have to open a Tier-1 account where the money is locked in and on attaining the specified age an investor can withdraw 40% of the corpus, while the remaining 60% has to be used to purchase a pension plan.
  • There is also a Tier-2 option where funds can be withdrawn whenever an investor wants to. It is optional for individuals working in the private sector to subscribe to NPS but it is mandatory for those who joined the central government from January 2004 to opt for the contributory pension plan.
  • The performance of the three pension fund managers for the central government employees indicate that the returns on subscribers’ contributions under NPS ranged between 8% and 16% during 2008-09 and 2010-11. For state government employees the return was as low as 6% in 2009-10 and 10% the next year.

What are latest Figures?

  • As per the latest data released by the government in Parliament, the return on investment is as low as 1.8% in case of those private sector employees, who opted for investments in government securities, the safest of the categories.
  • At the highest level, schemes in this segment offered 12.5% return for the period 2009-10 to 2010-11.