Why weak one-year NPS equity returns don't tell the full story: Five-year gains remain strong

The National Pension System's (NPS) short-term performance has been adversely affected by current market volatility.

Over the past year, the majority of equity-based pension funds have given negative returns. However, the longer-term picture remains much stronger, with all major equity schemes posting double-digit annualised returns over the last five years.

Tata Pension Management topped the category with a return of 1.55%, followed by ICICI Prudential Pension Fund at 1.53%, while SBI Pension Funds posted 0.69%. HDFC Pension Management delivered a marginal positive return of 0.21%.

Among the laggards, DSP Pension Fund recorded the steepest decline with a 7.89% loss over the one year, followed by Axis Pension Fund at -3.25%.

The picture changes significantly when viewed over a longer horizon. Over the past five years, every major pension fund in the same category has produced annualised returns of more than 10% . This clearly underscores the benefits of staying invested through market cycles.

ICICI Prudential Pension Fund topped the five-year performance chart with an annualised return of 12.72%, followed by Kotak Pension Fund at 12.35% and UTI Retirement Solutions at 12.04%.

Even the lowest performer in the category, SBI Pension Funds, generated an annualised return of 10.62% during the period.

The influence of short-term market changes on equity investments is highlighted by the difference between the one-year and five-year returns. Fianncial experts advise investors to focus on long-term performance rather than responding to transient market fluctuations.