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Best NPS Fund Manager
Compare and Find Out the Best NPS Fund Manager Using Our Scoring and Ranking Model.
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What is 1 Finance Score?
The 1 Finance Score involves a thorough evaluation and comprehensive analysis of various key parameters to assess all equity, corporate debt, government securities, and alternative investment funds of NPS schemes in India with maximum track record of over ten years. This approach enables you to choose an NPS scheme that aligns with your preferences, ensuring your decision is backed by extensive research and unbiased analysis.
Each fund is assigned a score on a scale from 1 to 100 based on the evaluation of all relevant factors. Here’s an overview of our scoring system:
- High (75 – 100)Top NPS with strong risk-adjusted returns and YTM, low costs, long history, portfolios with good quality & well diversified, low volatility, and strong track record.
- Medium (50 – 75)NPS with average risk-adjusted returns and YTM, moderate costs, a reasonable track record, slight volatility, and fair quality and diversification.
- Low (1 – 50)NPS with poor risk-adjusted returns, high costs, limited track record, low YTM, poor quality/diversification, high volatility, and inconsistent returns.
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Know more about NPS Scoring and Ranking Model
Our Methodology
Finding the perfect NPS Schemes can feel overwhelming. We're committed to making the process easier. Here's how we analyse NPS to bring you the most reliable recommendations:
1. Data Collection & Analysis
- The model begins with a comprehensive analysis of 106 NPS schemes, focusing specifically on NPS Tier 1 Scheme E, Scheme C, and Scheme G. These schemes have been selected due to their high subscriber base and widespread adoption.
2. Key Parameter Selection
- We have identified essential factors affecting NPS performance. These unbiased inputs help subscribers choose the right scheme.
3. Data Processing
- We have structured and Organised data for accurate analysis.
4. Scoring System
- Each parameter was assigned a numerical value based on both quantitative and qualitative factors.
5. 1 Finance Score & Rank
- After evaluating all parameters, we have derived a single 1F Score and 1F Rank for each NPS scheme, making decision-making simpler.
6. Continuous Updates
- We quarterly update our scoring model to reflect any changes in the schemes, ensuring users always get the latest information.
Note: This research and evaluation apply to NPS Tier 1, NPS Tier 2, and the NPS Vatsalya Investment framework.
Scoring Parameters
Our scoring model simplifies the National Pension Scheme investment, helping individuals better understand the scheme and make informed decisions. These choices can have a significant impact on your entire retirement journey. Here's what we consider when evaluating NPS:
Scheme E (Equity)
Scheme C (Corporate Debt)
Scheme G (Government Securities)
Scheme A (Alternative Investment Funds)
We use this method to help investors easily compare NPS Fund managers based on performance, risk, costs, and stability to find the best NPS scheme for themselves. By analysing past returns, risk-adjusted rewards, expense ratios, and fund history, we assign a score (1–100) and rank schemes to show which ones perform best. This removes guesswork and ensures investors have clear, up-to-date information to make confident decisions.
What is NPS?
NPS is a market-linked defined contribution scheme that helps you systematically save for your retirement by investing in financial instruments such as equities and debt.
The National Pension System is regulated by Pension Fund Regulatory and Development Authority (PFRDA) . It is often regarded as one of the best options for retirement planning because it is flexible and portable, giving you the freedom to save at your own pace.
The National Pension System is regulated by Pension Fund Regulatory and Development Authority (PFRDA) . It is often regarded as one of the best options for retirement planning because it is flexible and portable, giving you the freedom to save at your own pace.
How does NPS work?
NPS invests in a mix of asset classes, including equity, corporate debt, government securities, and alternative investments. This helps in balancing growth with risk management. Over time, it helps you build a sizable retirement fund, part of which can be withdrawn at retirement, while the rest is used to purchase an annuity for a steady post-retirement income. This secures your retirement life.
The National Pension System can be a smart way to enhance retirement income while enjoying tax benefits. Selecting the best NPS fund manager is crucial to align with your retirement goals and risk tolerance.
The National Pension System can be a smart way to enhance retirement income while enjoying tax benefits. Selecting the best NPS fund manager is crucial to align with your retirement goals and risk tolerance.
What are Benefits of Investing in NPS?
Retirement Security
- The NPS Tier 1 account is primarily aimed at building a retirement corpus. It has restrictions on withdrawals to ensure disciplined savings over the long term.
- Only under specific conditions, you can withdraw a portion of your savings before retirement.
Tax Benefits
- Contributions to NPS Tier 1 accounts are eligible for tax deductions:
a. Section 80C: Up to ₹1.5 lakh as part of the overall 80C limit.
b. Section 80CCD(1B): An additional ₹50,000 over and above the 80C limit, making it a total tax benefit of up to ₹2 lakh per financial year. - At retirement, up to 60% of the corpus withdrawn as a lump sum is tax-free.
- Tax benefits for NPS Vatsalya
Low Initial and Annual Contribution
- Minimum contribution at the time of opening: ₹500.
- Minimum annual contribution: ₹1,000 (may vary with updates).
- Allows you to save systematically even with modest contributions.
Flexibility
You can choose your contribution amount and investment strategy, with options to adjust as needed (Active or Auto Choice).
Portability
The account stays active regardless of changes in job, location, or employer, making it suitable for modern, mobile lifestyles.
Market-Linked Growth
Investments in equities, corporate debt, and government securities offer the potential for higher returns over the long term compared to traditional savings instruments.
Investment Choices and Asset Allocation
- You have three options for managing your investments:
a. Active Choice: You decide how much to invest in equities (E), corporate debt (C), and government securities (G) based on your preferences.
b. Auto Choice: A smart option where your investments are automatically adjusted based on your age. It starts with higher equity exposure when you're younger and shifts to safer investments as you get closer to retirement.
c. Balanced Lifecycle Fund: The Balanced Lifecycle Fund maintains a 50% equity allocation until age 45, then gradually reduces it to 35% by age 55. This strategy balances long-term equity growth with reduced risk as retirement nears. - Equity investments are capped at 75%, ensuring a good balance between growth potential and risk.
Low-Cost Structure
NPS has a low management fee, ensuring that more of your money goes toward building your retirement corpus.
Partial Withdrawals
You can withdraw up to 25% of your contributions for specific purposes like higher education, marriage, or medical emergencies after three years of investment.
Annuity Options
Upon retirement, you can withdraw up to 60% of the corpus as a lump sum (tax-free), while the remaining 40% is used to purchase an annuity, ensuring a regular income.
Universal Access
Available to all Indian citizens (18–70 years), whether salaried or self-employed, making it an inclusive retirement solution.
Transparency and Regulations
NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), ensuring transparency and security for investors.
What is an NPS Tier 1 Account?
The tier 1 Account under the National Pension System (NPS) is the primary retirement-focused account designed to help you accumulate a retirement corpus through disciplined, long-term savings. Here's a detailed breakdown:
Key Features of NPS Tier 1 Account
Tax Benefits
- Contributions to NPS Tier 1 accounts are eligible for tax deductions:
- Section 80C: Up to ₹1.5 lakh as part of the overall 80C limit.
- Section 80CCD(1B): An additional ₹50,000 over and above the 80C limit, making it a total tax benefit of up to ₹2 lakh per financial year.
- At retirement, up to 60% of the corpus withdrawn as a lump sum is tax-free.
Lock-In Period
- Your funds stay locked until you reach 60 years of age.
- Early withdrawals are allowed only under specific conditions.
Partial Withdrawals
- Up to 25% of your contributions (excluding employer contributions) can be withdrawn after three years of account activation.
- You can withdraw only under specific purposes like:
- Higher education.
- Marriage expenses.
- Purchase or construction of a house (only once during the tenure).
- Medical emergencies for self or family.
Retirement Options
- At the age of 60 (retirement age):
- 60% of the corpus can be withdrawn as a lump sum (tax-free).
- The remaining 40% must be used to purchase an annuity, which provides a regular pension post-retirement.
- Subscribers can defer withdrawals or annuity purchases until 75 years.
Conditions for Premature Exit from NPS Tier 1 Account
- Premature exit is allowed before 60 years, but only 20% of the corpus can be withdrawn as a lump sum. The remaining 80% must be used to purchase an annuity.
- Allowed after 5 years of account opening.
Who Should Opt for a NPS Tier 1 Account?
- Individuals looking for a disciplined, long-term retirement savings plan.
- Salaried and self-employed individuals seeking tax-efficient investments.
- Those wanting a low-cost investment option with flexibility in contribution amounts.
What is NPS Tier 2 Account?
The tier 2 Account under the National Pension System (NPS) is a voluntary savings account designed for those seeking more flexibility and liquidity in their investments. It serves as a complement to the NPS Tier 1 account, allowing subscribers to manage short-term or medium-term financial goals while benefiting from the same professional fund management as NPS Tier 1.
Key Features of NPS Tier 2 Account
Voluntary Savings Account
- NPS Tier 2 is an add-on account available only to subscribers of the NPS Tier 1 account.
- It is not mandatory and is entirely optional for those who want additional flexibility with their savings.
Flexibility in Withdrawals
- Unlike the NPS Tier 1 account, the NPS Tier 2 account allows you to withdraw your funds anytime without restrictions. This makes it highly liquid and suitable for short-term financial needs.
No Lock-In Period
- There is no lock-in period for the NPS Tier 2 account, except for government employees who wish to avail tax benefits (3-year lock-in applies in such cases).
- For other subscribers, contributions and withdrawals are entirely at their discretion.
No Tax Benefits (Except for Certain Government Employees)
- Contributions to NPS Tier 2 accounts do not qualify for tax deductions under Section 80C or any other section.
- Exception: Central government employees can avail of tax benefits under Section 80C for NPS Tier 2 contributions, but only if they opt for a 3-year lock-in.
Optional Account
- NPS Tier 2 accounts are purely optional and are best suited for those who want an additional savings avenue with high liquidity.
Differences Between NPS Tier 1 and NPS Tier 2 Accounts
| Feature | NPS Tier 1 Account | NPS Tier 2 Account |
| Purpose | Long-term retirement savings | Flexible, short-term savings |
| Tax Benefits | Yes (₹2 lakh max under 80C and 80CCD) | No (except for govt employees with 3-year lock-in) |
| Withdrawal | Restricted (only under specific conditions) | Unlimited and anytime |
| Lock-In Period | Until retirement (age 60) | None (except 3 years for govt employees claiming tax benefits) |
| Minimum Contribution | ₹500 (initial); ₹1,000/year | ₹1,000 (initial); no annual requirement |
| Investment Options | Active/Auto choice / Balanced Lifecycle Fund | Active/Auto choice / Balanced Lifecycle fund |
Who Should Opt for a NPS Tier 2 Account?
- Individuals looking for a flexible investment option with no restrictions on withdrawals.
- Investors seeking to leverage the benefits of professional fund management for short-term and medium-term goals.
- Those who already have a NPS Tier 1 account and want an additional avenue for savings and investments.
- Central government employees looking for tax benefits (with a 3-year lock-in).
What are Investment Options in NPS?
The National Pension System (NPS) provides three investment strategies to suit different investor preferences: Active Choice, Auto Choice, and the Balanced Lifecycle Fund. Each option offers a different approach to asset allocation based on risk tolerance, financial goals, and investment style.
1. Active Choice
- This option allows investors to decide how their funds are allocated across different asset classes. It is best suited for individuals who actively track markets and want to customise their portfolio based on their risk appetite and return expectations.
| Feature | Details |
| Investor Control | Full control over asset allocation. |
| Available Asset Classes | Equity (E), Corporate Debt (C), Government Securities (G), Alternative Investment Funds (A) |
| Maximum Equity Allocation | NPS Tier 1: Up to 75% NPS Tier 2: Up to 100% |
| Maximum Alternative Investment Allocation | Capped at 5% (due to higher risk). |
| Risk Suitability | Suitable for investors who want high returns and can actively manage their investments |
* The maximum equity allocation is capped at 75% up to the age of 50, and it gradually reduces by 2.5% each year.
2. Auto Choice
- In Auto Choice, asset allocation is automatically adjusted based on the subscriber's age. As the investor grows older, the portfolio shifts toward safer assets, making it ideal for those who prefer a hands-off approach.
- Types of Auto Choice Investment Options
- NPS offers three Auto Choice Lifecycle Funds, each designed for different risk levels:
| Auto Choice Type | Risk Level | Max Equity Allocation | Suitable For |
| Aggressive (LC75) | High Risk | 75% Equity | Young investors with high risk tolerance. |
| Moderate (LC50) | Moderate Risk | 50% Equity | Balanced investors seeking stability. |
| Conservative (LC25) | Low Risk | 25% Equity | Risk-averse investors nearing retirement. |
3. Balanced Lifecycle Fund
The Balanced Lifecycle Fund works similarly to Auto Choice, but its key difference is how long it maintains higher equity exposure.
- Equity allocation remains at 50% until age 45.
- Corporate Debt (C): 30% | Government Securities (G): 20%.
- After age 45, equity allocation reduces gradually by 2% per year until age 50 (down to 40%).
- After age 50, it reduces by 1% per year, capped at 35% by age 55.
- The system automatically adjusts your investment after age 45, while equity remains at 50% until then.
| Type | Risk Level | Max Equity Allocation | Suitable For |
| Balanced Lifecycle Fund | Moderate | 50% (until age 45), reducing gradually to 35% | Investors who want a mix of growth and safety. |
Which NPS Investment Strategy is Best for You?
- If you want full control → Active Choice
- If you prefer automatic adjustments → Auto Choice (Aggressive, Moderate, or Conservative based on risk level)
- If you want a balance between growth and stability → Balanced Lifecycle Fund
The chart shows how equity allocation in NPS Life Cycle Funds decreases with age. Younger
investors start with higher equity exposure. Over time, funds shift towards safer investments
like bonds. The Aggressive Life Cycle Fund has the highest equity allocation (~75%) for young
investors. It gradually reduces but stays higher than other funds. The Moderate Life Cycle Fund
starts with around 50% equity, offering a balance of risk and returns. The Conservative Life
Cycle Fund begins at ~25% equity, focusing on stability. The Balanced Life Cycle Fund follows a
steady decline in equity exposure after the age of 45. This helps investors transition from high
growth to low risk as they approach retirement. Active Choice maintains up to 75% equity till
age 50, then gradually reduces. Investors can choose a fund based on their risk appetite and
financial goals. The chart shows how equity allocation in NPS schemes reduces with age across
different investment choices.
Asset classes in NPS
The National Pension System (NPS) provides subscribers with the flexibility to allocate their investments across four distinct asset classes. Each asset class has its own risk-return profile, making it essential for investors to select allocations based on their financial goals and risk appetite. The four asset classes available under NPS include Equity (E), Corporate Debt (C), Government Securities (G), and Alternative Investment Funds (A).
1. Scheme E – Equity
- Equity investments are considered the most high-risk, high-return asset class in NPS. Asset Class E primarily invests in stocks of listed companies, making it market-linked and volatile, yet offering the highest potential for long-term capital growth.
- This asset class is suitable for investors with a high-risk appetite who are willing to withstand short-term market fluctuations in pursuit of higher returns over time.
- In NPS Tier 1 accounts, the maximum allocation allowed in Equity is 75%, whereas in NPS Tier 2 accounts, investors can allocate up to 100%. This makes it a preferred choice for individuals looking for long-term wealth accumulation.
2. Scheme C – Corporate Debt
- Corporate debt investments offer a balance between risk and returns, making them a moderate-risk, moderate-return asset class.
- Asset Class C includes corporate debt and debentures issued by corporate entities, including banks and public financial institutions, with at least an AA rating. These instruments generate stable interest income while offering some capital appreciation.
- Although corporate debt is less volatile than equity, it is still market-dependent. Investors seeking a balanced portfolio with a mix of growth and stability may find this asset class an ideal choice.
3. Scheme G – Government Securities
- Government Securities provide the safest investment option within the NPS framework. Asset Class G primarily consists of government securities (G-Secs) and units of mutual funds set up as dedicated funds for investment in government securities. The allocation to mutual funds shall not exceed 5% of the AUM under Scheme G at any point in time.
- This asset class is ideal for conservative investors who prioritise capital protection over aggressive growth. However, one limitation is that returns from government securities are often lower than inflation, which could reduce the purchasing power of savings over time.
- Despite this, Asset Class G remains a preferred choice for individuals nearing retirement or those who prefer stability and security in their investments.
4. Scheme A – Alternative Investment Funds (AIFs)
- Alternative Investment Funds (AIFs) provide an opportunity for high-risk, high-return investments. This asset class includes instruments such as Real Estate Investment Trusts (REITs), Mortgage-Backed Securities (MBS) and Infrastructure Investment Trusts (InvITs). The primary advantage of Asset Class A is diversification, as it provides exposure to alternative assets beyond traditional equity and debt instruments.
- However, due to the illiquid and high-risk nature of these investments, the maximum allocation allowed in NPS is only 5%. This asset class is recommended for aggressive investors who are willing to take risks for potentially higher returns.
How to Invest in NPS
Investing in the National Pension System (NPS) is simple and can be done online or offline. Follow these steps:
Step 1: Check Eligibility
- Any Indian citizen (resident or NRI) aged 18 to 70 can open an NPS account.
- Citizens of INDIA, Including NRI’s & OCI Card holders.
- Any salaried or individual person can open an NPS account.
Step 2: Register for an NPS Account
- You can open an NPS account online or offline:
- Online Registration (eNPS Portal or CRA Platforms like NSDL, KFinTech)
- Visit the official eNPS website and select "Join NPS".
- Enter your details (Name, DOB, PAN, Aadhaar, Mobile Number, Email).
- Choose between NPS Tier 1 (mandatory) and NPS Tier 2 (optional) accounts.
- Complete KYC verification via Aadhaar or PAN.
- Upload documents (photo, signature, PAN, bank details).
- Make an initial contribution (minimum ₹500).
- Complete OTP or e-sign verification.
- Receive your Permanent Retirement Account Number (PRAN) via email/SMS.
- Offline Registration (Through PoPs like Banks & Post Offices)
- Visit the nearest PoP (Point of Presence) and collect the NPS form.
- Fill in your details and attach KYC documents (PAN, Aadhaar, Photo).
- Submit the form & make the first deposit (minimum ₹500).
- Receive a PRAN kit with your account details.
Step 3: Make Contributions
- Contribute to NPS Tier 1 or NPS Tier 2 accounts via the eNPS website or at a PoP center.
- The minimum annual contribution is ₹1,000 for NPS Tier 1.
Step 4. Investment Allocation & Fund Management
- Choose a Pension Fund Manager (PFM) from options like SBI, HDFC, ICICI, Kotak, LIC, UTI, etc.
- Select your investment strategy:
- Active Choice – You decide how funds are allocated across Equity (E), Corporate Debt (C), Govt Debt (G), and Alternative Assets (A).
- Auto Choice – The system automatically adjusts your investments based on age.
Step 5. Investment Settlement
- Once you contribute, funds are invested and units are credited to your NPS account in T+2 days.
Step 6. Nomination
- You can nominate up to 3 people and assign a percentage of your savings to each nominee.
Step 7. Manage Your NPS Account
- Track and manage your investments through the NSDL NPS portal.
- Contributions and fund allocation can be adjusted over time.
This structured and tax-efficient approach ensures a disciplined way to save for retirement while benefiting from market-linked growth.
Tax Benefits Under NPS
Tax Benefits for Individuals
- NPS subscribers can claim tax deductions under Section 80CCD(1) of the Income Tax Act, 1961.
- The deduction limit is ₹1.5 lakh per year within the overall Section 80C limit.
Additional Tax Benefit (Exclusive to NPS Subscribers)
- An extra deduction of ₹50,000 is available under Section 80CCD(1B) for contributions to NPS Tier 1 NPS accounts.
- This benefit is over and above the ₹1.5 lakh deduction under Section 80C, making the total tax-saving potential ₹2 lakh per year.
Tax Benefits for Corporate Employees
- Under the old regime, the contributions made by your employer to NPS are eligible for deductions, capped at 10% (14% for central government employees) of your basic salary plus dearness allowance (if any), with a maximum limit of ₹7.50 lakh under Section 80CCD(2).
- Under the new regime, the contributions made by your employer to NPS are eligible for deductions, capped at 14% of your basic salary plus dearness allowance (if any), with a maximum limit of ₹7.50 lakh under Section 80CCD(2).
- The total deduction for PF, NPS, and superannuation funds combined is capped at ₹7.5 lakh per year.
Tax benefits for NPS Vatsalya
Budget 2025 extended the tax benefits available to the National Pension Scheme (NPS) under sub-section (1B) of Section 80CCD of the Income Tax Act, 1961 to the contributions made to the NPS Vatsalya accounts, as applicable.
Disclaimer
1 Finance Private Limited operates independently. The information presented in the scoring and ranking model is solely for educational and informational purposes and should not be construed as financial advice. Before making any financial decisions, it's essential to undertake your own thorough research and analysis. If you're uncertain about any financial matters, we strongly recommend seeking guidance from a qualified financial advisor.
TABLE OF CONTENT
Our Methodology
Scoring Parameters
What is NPS?
How does NPS work?
What are Benefits of Investing in NPS?
What is an NPS Tier 1 Account?
What is NPS Tier 2 Account?
What are Investment Options in NPS?
Which NPS Investment Strategy is Best for You?
Asset classes in NPS
How to Invest in NPS
Tax Benefits Under NPS
FAQ