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 last 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 the same period, AUMs of the mutual fund industry—a long-term investing avenue in a similar space—grew 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 it 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.

Beyond government staff

Of the NPS’s ₹14.36 trillion AUMs, about three-fourths come from contributions by about 9.9 million central and state government employees. In the five years to March 2025, these segments have grown at a compounded annual rate of 28% and 23%, respectively. However, these are not the fastest-growing segments in the NPS.

From a future growth viewpoint, the two segments that hold greater growth potential are ‘corporate’ and ‘all citizens’. The first is where companies enable NPS investments via an employee-employer relationship.

As of March 2025, 17,502 organisations were registered under the NPS, and they were routing NPS investments of 2.3 million employees. The second is investments made by the general public, which had 4.3 million subscribers as of March 2025. In terms of AUMs, these two segments have grown at a compounded annual rate of 40% and 41%, respectively, in the last five years.

Changing profile

As of March 2025, the average corpus in a central government NPS account was ₹14.1 lakh. This figure was ₹9.6 lakh for the corporate segment and ₹1.6 lakh for the general public segment. A main reason for this differential is that government employees have been in the NPS longer, and they also tend to treat the NPS as a prime option for retirement planning. The general public, by comparison, treats it more as a tool to maximise tax savings.

The two main non-government segments are seeing some interesting evolution. One, the share of female subscribers has increased in both segments between 2015-16 and 2023-24. Two, the share of younger subscribers, those up to the age of 30 years, has also increased in the general public segment, from about 9% in 2015-16 to about 39% in 2023-24. The younger cohort has a different reading of equity investments.

Equity kicker

Post-Covid, India has seen a huge expansion in investors inclined to equity investing, even speculation. This is demonstrated by the sharp increase in both the number of demat accounts and derivatives trading by individuals.

A growing chunk of NPS subscribers are under 30. Even if their primary goal is tax savings, this cohort is more willing to take risks with retirement planning. The 100% equity option is tailored to that mindset.

Over the long term, equities add a powerful kicker to returns—and the NPS track record proves it. Even the worst-performing equity schemes with seven-year history have outpaced the best debt or gilt schemes by 3-5 percentage points annually. Compounded over decades, that gap turns into a sizeable wealth boost.

Growth lever

In general, fund houses operate on thinner margins in the pensions space than in the mutual funds space. Thus, volumes become even more critical for them. For the 11 registered pension funds as of March 2025, the 100% equity option will give them something more to sell to investors. Of these 11, three fund houses—SBI, LIC and UTI—have a captive market by virtue of being designated to manage the assets of central government and state government employees.

Thus, the other fund houses are effectively left with what is currently about one-fourth of the NPS corpus. Their windows to growth are the corporate segment and the general public segment. Some of them have been making inroads. In non-designated assets, HDFC PF leads, and ICICI PF is third. With propositions like the 100% equity option, they will look to increase their offerings—and share in the NPS pie.

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