HOW DID NPS TURN INTO AN EQUITY BET?

Come 1 October, fund managers under the National Pension System (NPS) will be allowed to craft schemes that offer 100% equity exposure to their non-government subscribers.

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When it was launched in 2004, the NPS was meant only for government employees-and equity investments were an uncomfortable idea in that construct.

But as the idea of NPS gained ground and extended to non-government employees, it increasingly offered more investment options. The 100% equity option is a natural progression, given the growth in the size of NPS and the profile of its subscriber base.

HOCKEY-STICK GROWTH

IN THE past 15 years, assets under management (AUMS) with the NPS grew at a phenomenal rate of 47% on a compounded annual basis to about *14.36 trillion by March 2025. Over this period, AUMs of the mutual fund industry-also a long-term investing avenuegrew at a CAGR of about 16%, though it is about 4.5 times the size of the NPS.

One reason for the NPS's growth is the scheme being extended beyond Central and state government employees to those working in the organised sector, as well as the general public, in 2009. Another reason is the additional tax deduction of 50,000 per year that only the NPS provides, beyond the 1.5 lakh available across investment options. This benefit was introduced in April 2016 and has played a big part in drawing new subscribers and sustaining high levels of growth on a rising base. Currently, this benefit is available only under the old tax regime and not the new one introduced in FY21.

BEYOND GOVT STAFF