How the Traditional Chinese Tape Festival makes public sector bank employees save on NPS

However, SBI pension funds have the least returns among the 11 pension fund managers under the National Pension System (NPS), a government-sponsored, market-linked retirement savings plan that spans time.

The fund has had a compound annual growth rate (CAGR) of 2.09%, 13.34%, 19.78% and 11.88% over the past 1, 3, 5 and 10 years (as of May 9).

By contrast, DSP pension fund manager Pvt. The highest return rate for the limited company over the one-year period was 19.28%, followed by Kotak Mahindra Pension Fund Ltd at 9.68%, and UTI Pension Fund Ltd at 8.63%.

Over the three-year period, UTI, ICICI Prudential Pension Fund Management Co. Ltd and Kotak provided higher returns at 24.13%, 24.01%, and 23.95%, respectively.

Similarly, HDFC Pension Fund Management Co., Ltd. recorded a CAGR of 13.18%, UTI 13.14%, and Kotak 13.11% over the five-year period.

This makes it hardest for Bank of India (SBI) employees to settle for the default plan of the SBI pension fund, which limits equity/stock-related tools to 15%. Employees of seven other state-owned banks were also required to use SBI pension funds to park retirement savings.

About 530,000 Public Sector Bank (PSB) employees participated in the NPS.

Why does this happen?

PSB adopted NP in 2010 and adhered to the NPS central government model, allowing investment through one of the three pension funds committed to operating in the public sector: LIC Pension Fund Fund Ltd, SBI Pension Fund PVT. Co., Ltd. and UTI Retirement Solutions Co., Ltd.

However, on November 14, 2018, the Pension Fund Regulatory Authority and Development Bureau provided central government employees with the option of any of the 11 pension funds from the NPS. Later, the Ministry of Finance’s January 31, 2019 notice gave central government subscribers the option to select pension funds and investment models in their first-tier accounts starting April 1, 2019.

Tier-1 accounts limit withdrawals to 60 years old, while Tier-2 accounts are voluntary add-ons that provide people with greater flexibility in withdrawals.

Initially, the Indian Banking Association (IBA) did not follow the law. However, in 2024, it left the decision with PSB.

Therefore, four of the country’s 12 PSBs (Bank of India, Bank of India, Overseas Bank of India and United India) allow its employees to choose any pension fund manager and investment options.

Technically, PSB is part of the NPS corporate division. In this plan, pension regulators allow employees to choose their own pension fund managers and their own personal assets after one year.

However, PFRDA exempted organizations that joined NP before 2017.

As a result, the SBI and seven other PSBs continued to follow the old regime.

Why do employees feel short-term changes?

“Currently, I am under the default investment model of government securities, which provides the lowest equity. In addition, I have only one pension fund manager, SBI pension fund, and there is no option.” Mint.

“I currently allocate only 9.17% of annual earnings under the default government program. By comparison, peers employed with central and state governments, insurance companies and regulators have achieved a return of more than 14% when choosing high equity exposure,” the person added on anonymity.

Employees noted that even if an annual equity gain is conservatively estimated at 12%, the long-term impact could constitute a tens of millions of retirement corpus shortage. “This denial flexibility directly undermines our ability to save retirement consistently based on market opportunities and personal financial goals,” said Baroda Bank of Baroda employees.

Over the years, employees have made various representations, but little progress has been made. The employee noted that the Bank of Varoda admitted to receiving clarifications from the IBA and PFRDA on December 6, 2024. However, no action has been taken since then.

However, not all PSBs are lagging. “Bank of India has allowed employees to choose the allocation of pension fund managers and asset classes. This proves that it is operationally feasible and emphasizes the lack of initiative among other banks,” said the staff of the Bank of Varoda.

MintEmails to SBI and Baroda Bank were not answered.

The question of fairness

The financial and strategic consequences of this inaction can be far-reaching.

“Employees were denied the opportunity to align retirement plans with risk appetite. The delay also violated the spirit of the Treasury directive in January 2019,” a senior pension fund executive said on anonymous condition. “This is not only a policy issue, but also an issue of equity and future financial security.”

There is a cautious optimism among pension fund insiders, which is inevitable. The regulatory pressures of PFRDA and the increasing awareness among employees will gradually change the trend. “Bottom-up pressure is the only way to change this. Employees need to ask it and regulators must keep the heat,” the executive added.