If you're planning for your retirement and considering long-term wealth creation, the National Pension System (NPS) could be your go-to option. Designed by the Government of India, NPS encourages individuals to invest systematically during their working years to build a robust retirement corpus.

One of the key attractions of NPS is its diverse investment options, including equity funds, government bond funds, and corporate debt funds. These funds are managed by reputed pension fund managers who aim to generate stable and inflation-beating returns over time.

Let’s take a look at the top three NPS funds that have delivered the highest returns over 1, 3, and 5 years, across all major asset categories.

Equity Fund Performance:

• 1-Year Return: 5.11%

• 3-Year Return: 12.87%

• 5-Year Return: 26.35%

Kotak Mahindra Pension Fund stands out for its robust 5-year equity fund return of 26.35%, making it one of the top performers in the NPS space. Although the short-term return over one year is modest, its long-term equity returns are quite impressive.

Government Bond Fund Performance:

• 1-Year Return: 10.80%

• 3-Year Return: 8.53%

• 5-Year Return: 7.51%

Corporate Debt Fund Performance:

• 1-Year Return: 9.85%

• 3-Year Return: 7.17%

• 5-Year Return: 7.29%

Kotak also maintained strong consistency across debt categories, particularly in the government bond segment with a near 11% return over the last year.

Equity Fund Performance:

• 1-Year Return: 2.93%

• 3-Year Return: 12.49%

• 5-Year Return: 26.23%

ICICI Prudential's equity performance is similar to Kotak in the long run, offering 26.23% returns over five years. It’s a suitable pick for investors seeking growth with a slightly conservative equity outlook in the short term.

Government Bond Fund Performance:

• 1-Year Return: 11.35%

• 3-Year Return: 8.60%

• 5-Year Return: 7.50%

Corporate Debt Fund Performance:

• 1-Year Return: 9.92%

• 3-Year Return: 7.26%

• 5-Year Return: 7.82%

The government bond fund delivered over 11% return in the past year, the highest among all listed NPS funds, showing its strength during interest rate cycles.

Equity Fund Performance:

• 1-Year Return: 2.28%

• 3-Year Return: 11.22%

• 5-Year Return: 24.77%

Aditya Birla Sun Life’s equity fund has shown solid growth over the long term, making it a good option for those with a moderate risk appetite. Although the one-year return lags slightly, its 5-year returns remain competitive.

Government Bond Fund Performance:

• 1-Year Return: 11.06%

• 3-Year Return: 8.77%

• 5-Year Return: 7.66%

Corporate Debt Fund Performance:

• 1-Year Return: 9.66%

• 3-Year Return: 7.32%

• 5-Year Return: 7.71%

Its bond funds also maintained a strong profile, with stable and reliable returns across all time frames.

When choosing an NPS fund, it's essential to consider both your investment horizon and risk profile. While equity funds may offer higher long-term growth, debt instruments like government bonds and corporate debt provide stability and predictable income.

Among all, Kotak Mahindra Pension Fund shines with its 5-year equity return of 26.35%, while ICICI Prudential tops in government bond returns with 11.35% over one year. Aditya Birla Sun Life, on the other hand, offers a balanced mix for cautious investors looking for consistent performance.

NPS not only provides wealth creation opportunities but also brings in tax benefits under Section 80CCD, making it a smart retirement planning tool. So, whether you're just starting out or nearing retirement, choosing the right pension fund today can significantly impact your financial freedom tomorrow.