One of the lowest-cost and tax-efficient pension plans for investors to meet their retirement goals is the National Pension System (NPS).
By making contributions to four asset classes—equity (E), corporate debt (C), government securities (G), and alternative investment funds (A)—NPS enables individuals to accumulate a sizable pension corpus.
Subscribers can select from ten registered Pension Fund Managers (PFMs) who will allocate your money across asset classes according to your preferences. Over the past ten years, HDFC Pension has outperformed the other nine pension funds, making it the top performer among the ten fund managers.
NPS scheme E returns
HDFC Pension Fund has established a strong record of sustained performance within the National Pension System (NPS) Scheme E Tier-I (Equity) portfolio. Over a 10-year horizon, under the government sector, HDFC has outperformed almost all of its major established peers with an impressive 13.01% annualized return, placing it right alongside the benchmark return of 13.12%. It leads well-known competitors like ICICI (12.90%), Kotak (12.75%), UTI (12.54%), LIC (11.69%), and SBI (11.64%),
| Pension Fund | 10-Year Returns In % | Returns Since Inception In % |
| HDFC | 13.01 | 13.93 |
| ICICI | 12.9 | 12.44 |
| KOTAK | 12.75 | 11.82 |
| UTI | 12.54 | 12.19 |
| LIC | 11.69 | 12.24 |
| SBI | 11.64 | 10.66 |
| TATA | – | 13.11 |
| AXIS | – | 10.26 |
| BIRLA | – | 12.28 |
| DSP | – | 8.61 |
| Benchmark | 13.12 | – |
Source: NPS Trust. Data as of 25th August 2026
NPS Scheme E performance for the non-government sector
The comparison highlights the top-performing NPS Scheme E funds over a 10-year period. It focuses specifically on NPS Scheme E (Equity) under Tier I – PoP for the non-government sector. The analysis covers six pension fund managers with a 10-year track record: HDFC Pension Fund, ICICI Prudential Pension Fund, Kotak Mahindra Pension Fund, LIC Pension Fund, SBI Pension Fund and UTI Retirement Solutions.
| Pension Fund | 10-Year Returns In % | Returns Since Inception In % |
| HDFC | 12.99 | 13.91 |
| ICICI | 12.88 | 12.43 |
| KOTAK | 12.74 | 11.81 |
| UTI | 12.52 | 12.18 |
| LIC | 11.67 | 12.22 |
| SBI | 11.62 | 10.65 |
| Benchmark | 13.12 | – |
Source: NPS Trust. Data as of 25th August 2026
What is NPS Scheme E?
Scheme E is the equity-oriented asset class under the National Pension System (NPS), designed to provide long-term capital appreciation by investing predominantly in equity and equity-related instruments. Since equities carry higher market-linked risk than debt or government securities, Scheme E can offer higher growth potential over a long investment horizon, but returns are not guaranteed.
Under the Active Choice option, NPS subscribers can now allocate up to 100% of their Tier-I contribution to Equity (E). Subscribers can decide their allocation based on their risk appetite, age, and retirement horizon. NPS also offers Auto Choice, where equity allocation is automatically adjusted with age.
For a retirement investor, Scheme E should therefore be viewed as a long-term wealth-creation component of the pension portfolio, rather than an avenue for chasing short-term market returns.
What are the routes to invest in NPS Scheme E?
There are essentially two ways an NPS subscriber can get equity exposure:
Active Choice: The subscriber chooses the pension fund manager and decides the allocation across asset classes. Equity allocation under Tier-I can go up to 75%, subject to the applicable NPS investment framework.
Auto Choice: The subscriber chooses a life-cycle fund, and the allocation is managed automatically based on age. Under the Life Cycle 75 – High option, for example, equity allocation starts at up to 75% and progressively reduces as the subscriber gets older. Other life-cycle options provide lower equity exposure for investors with a more moderate or conservative risk profile.
With the introduction of the Multiple Scheme Framework (MSF) for non-government subscribers, investors also have greater choice among schemes offered by registered Pension Funds, with schemes carrying different risk profiles and investment strategies.
They can also invest up to 100% in equity using the MSF structure
What are the factors that can impact NPS Scheme E performance?
Scheme E performance is primarily influenced by the performance of the underlying equity markets, but several factors can contribute to differences in returns between pension funds.
These include overall market cycles, sector allocation, stock selection, market-cap exposure, valuation levels, portfolio concentration, cash or liquidity management and the fund manager’s investment approach. Macroeconomic factors such as interest rates, inflation, corporate earnings, global market movements and domestic economic growth can also affect equity valuations.
Importantly, investors should distinguish between market-driven performance and fund-manager-driven performance.
“In a rising market, most equity-oriented portfolios may generate strong returns; the greater test of a fund manager’s approach is how consistently it performs across different market cycles and how effectively it manages downside risk,” said Vishwajeet Goel, Head of Pensionbazaar.
Where do fund managers differ?
Even within the regulatory framework governing NPS investments, fund managers can differ meaningfully in portfolio construction, sector weights, stock selection, market-cap preferences and risk management approaches.
However, investors should not assume that the fund manager with the highest return over a particular period will necessarily remain the best performer. A fund may outperform because of a temporary overweight to a particular sector or stock that happened to perform strongly during that period.
The more useful approach is to examine whether a fund manager has demonstrated consistent outperformance across multiple market cycles, rather than evaluating performance on the basis of one-year or short-term returns.
Beyond returns: What should investors check?
Investors should look beyond absolute returns. Returns are important, but the quality and consistency of those returns matter equally for a retirement portfolio.
According to Goel, some of the key parameters investors can examine are:
● Long-term returns: Evaluate 5-year and longer periods wherever sufficient history is available rather than focusing only on recent performance.
● Consistency: Check how frequently the fund has outperformed its benchmark and peers across different periods.
● Volatility: Understand how sharply the portfolio tends to move during market corrections.
● Downside protection: Examine how the fund behaved during periods of market stress.
● Risk-adjusted returns: Metrics such as the Sharpe ratio can help assess whether higher returns have been achieved with proportionately higher risk.
● Benchmark-relative performance: Compare the fund with its relevant benchmark rather than looking at absolute returns alone.
● Portfolio composition: Review sector and stock concentration to understand what is driving performance.
For a retirement product, a fund that delivers competitive returns with relatively controlled downside and greater consistency can be more valuable than one that simply tops the return chart in a particular year.
NPS: When is switching fund managers worthwhile?
A single year of underperformance should generally not be sufficient reason to switch, particularly for a long-term retirement investment. Equity markets move through cycles, and different investment styles can perform differently at different points in the cycle.
However, persistent underperformance over several years warrants a closer review.
“Investors should examine whether the underperformance is consistent across different market conditions, whether it is significant relative to the benchmark and peer group, and whether the fund’s risk profile or investment approach has changed,” said Goel.
NPS provides subscribers with the flexibility to change their Pension Fund, subject to the applicable rules; PFRDA currently states that subscribers can change their pension fund once a year.
The decision to switch should therefore be based on persistent, risk-adjusted underperformance rather than short-term rankings.
NPS: How to balance returns and stability?
For retirement savings, consistency should carry significant weight alongside returns. NPS is intended for long-term retirement accumulation, so investors should ideally avoid making decisions based on short-term market movements or chasing the latest top-performing fund.
A sensible approach is to look at a fund manager’s long-term track record, consistency across market cycles, downside performance, risk-adjusted returns, portfolio construction, and adherence to the stated investment strategy.
At the same time, stability should not mean compromising on growth.
“Younger investors with a long retirement horizon may have greater capacity to absorb equity-market volatility, while investors closer to retirement may need to place greater emphasis on capital preservation and reducing portfolio risk,” stated Goel.
Ultimately, the objective should not be to identify the fund manager that delivered the highest return last year, but to choose an investment approach that has the potential to compound retirement savings consistently over the investor’s remaining horizon while remaining aligned with their risk appetite.
Disclaimer: NPS returns are market-linked and not guaranteed. Past performance does not indicate or guarantee future returns. The returns cited in this article are based on data published by NPS Trust as of August 25, 2026, and may change over time. Investors should consider their risk appetite, investment horizon and retirement goals before making investment decisions.