PSU Bank Employees Losing Crores of Rupees in Pension Funds, Not able to Select Funds of their Choice

PSU Bank Employees are losing crores of rupees of their hard earned money by not being able to choose pension fund of their choice. Employees are continuously raising their voice against this. Some Banks have allowed employees to choose pension fund of their choice whereas majority of the banks have not yet given this freedom to their employees.

These bank employees are enrolled under the National Pension System (NPS), a government-sponsored, market-linked retirement savings scheme. However, they are being forced to invest their money with SBI Pension Funds Pvt. Ltd., which has consistently delivered the lowest returns among the 11 pension fund managers available under the NPS.

SBI Pension Fund: The Weakest Performer

As of 9 May 2025, SBI Pension Fund’s performance across all key timeframes lags significantly:

• 1-year return: 2.09%
• 3-year return: 13.34%
• 5-year return: 19.78%
• 10-year return: 11.88%

In contrast, other fund managers have offered much higher returns. For example:

• DSP Pension Fund delivered 19.28% in just the past year.
• UTI and Kotak Pension Funds posted over 13% CAGR over 5 years.
• HDFC Pension Fund offered 13.18%, nearly double that of SBI for the same period.

This shows that Bank Employees are losing crores of rupees. Let’s understand with the help of an example.

Example

Suppose, a public sector bank employee contributes ₹20,000 per month to NPS (₹2.4 lakh per year). The contribution period is 30 years. There are no withdrawals during the period.

SBI’s average long-term return is about 9% per annum.

• Using compound interest formula:
• Future Value = ₹20,000/month @ 9% for 30 years
• = ₹3.66 crore

Let’s say a fund offers a better average return of 12% per annum. Many top funds have offered more than 12% returns but we are taking only 12% in this case.

• Future Value = ₹20,000/month @ 12% for 30 years
• = ₹6.98 crore

This shows that there is a clear loss of Rs.3.32 crores. This is the reason why bank employees are protesting and demanding that they should be allowed to choose pension fund of their choice.

SBI Employees and 7 Other PSBs Left Behind

This issue is most acute for State Bank of India’s own employees, who are by default enrolled into SBI Pension Fund’s conservative scheme. This scheme limits equity investments to just 15%, which significantly caps long-term returns. Employees in almost other state-run banks are also undergoing same condition.

Out of around 5.3 lakh PSU bank employees enrolled in the NPS, the vast majority are unable to switch to better-performing fund managers or even adjust their asset allocation (like choosing more equities for long-term growth).

Why Can’t They Choose?

The core of the problem lies in policy lag. When PSBs adopted the NPS back in 2010, they chose a conservative investment model that was closer to the central government NPS pattern, and limited to three fund managers: SBI, LIC, and UTI.

In 2018, the pension regulator (PFRDA) allowed central government employees to choose any one of 11 pension fund managers, with flexibility in asset allocation. This came into effect in April 2019.

However, the Indian Banks’ Association (IBA) didn’t implement this change for PSBs. Only in 2024, IBA left it to individual banks to decide. Since then, only four of the 12 PSBs—Bank of India, Union Bank of India, Indian Bank, and Indian Overseas Bank—have granted their employees the freedom to choose their pension manager and asset class.

SBI and the remaining PSBs still follow the old model. Ironically, while NPS corporate sector rules do allow such flexibility, banks that joined before 2017 were exempt from these reforms—unless they opt in voluntarily.

A Fairness and Financial Security Issue

Pension fund experts warn that this isn’t just a policy delay—it’s a matter of fairness. Employees working in similar roles, for similar employers, are receiving significantly lower retirement benefits just because their bank has not updated its internal rules.

“This goes against the spirit of the finance ministry’s directive from 2019,” said a senior pension fund executive. “Employees are being denied the right to plan their retirement in line with their personal risk appetite.”

There is hope, however. Insiders believe that as more employees raise their voices, and as regulatory pressure from PFRDA increases, change will come.

What Needs to Be Done

• Banks must enable individual choice for pension fund selection and asset allocation.
• The RBI, IBA, and PFRDA should push lagging banks to align with NPS norms.
• Transparency and communication with employees must improve.

Conclusion

In a country where financial literacy is growing and long-term savings matter more than ever, denying public sector employees the freedom to manage their retirement funds is not just outdated—it’s unfair. With clear rules in place and examples set by some banks, it’s time for the remaining PSBs to act, before their employees pay the price for years to come.