The pension funD regulator’s new digital toolkit will enable National Pension System (NPS) subscribers to make better-informed retirement planning decisions. They can compare how different pension fund managers have performed over the same period rather than relying on point-to-point returns.
The Pension Fund Returns for Informed Decision & Empowerment (PRIDE-DISHA) will enable investors to decide whether to remain in a higher-equity active choice strategy, move to an auto choice option for automatic age-based rebalancing, or switch between them as they approach retirement in order to optimise long-term risk-adjusted returns.
How to use the toolkit
A subscriber will have to enter his date of birth, contribution start date and monthly contribution and select the schemes he wants to compare. The toolkit uses an extended internal rate of return (XIRR), which considers the actual timing of each monthly contribution.
The tool lets subscribers pick up two schemes and compare them side by side, with bar charts showing corpus and returns across pension funds, including both active and auto choice options. “Seeing actual historical outcomes laid out this way makes it much easier for a subscriber to judge which pension fund or choice has delivered better for someone contributing regularly, rather than relying on headline return numbers,” says Rahul Bhagat, CEO, DSP Pension Fund.
This provides a more accurate picture of the returns that an investor would have experienced through monthly investments. It displays the final accumulated corpus based on historical net asset value (NAV) growth, helping assess not only percentage returns but also the actual wealth that could have been created over time.
Kurian Jose, chief executive officer, Tata Pension Fund Management, says by using a common methodology for all schemes, PRIDE-DISHA improves transparency and comparability. “It helps identify which pension funds have historically generated higher retirement wealth and compare active choice and auto choice options based on their own investment horizon and risk preference,” he says.
Decision-support tool
Since the calculations are based on historical performance, it should be used as a decision-support tool rather than a guarantee of future outcomes. Amit H L, founder & CEO, Floatr Wealth, says a younger investor may be comfortable taking more equity exposure, while someone closer to retirement may prefer stability. “So it should not be used as a return ranking tool. It gives you better information, but the final decision should still depend on your goals and risk appetite,” he says.
Disclaimer: This article is based on a recent ITAT Pune ruling in a specific case. Judicial decisions are fact-specific, and their applicability depends on individual circumstances. Taxpayers should seek professional advice before relying on this ruling for their own cases.
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