Market specialists emphasise the importance of XIRR over CAGR in understanding real returns for National Pension System investors, reflecting the impact of irregular contributions and withdrawals.
For National Pension System subscribers, the return figure that matters most is not always the simplest one. Because contributions and withdrawals can happen at different times, a standard point-to-point growth rate may flatter or distort the real experience of an investor. That is why market specialists say XIRR, or extended internal rate of return, often gives a more accurate picture of NPS performance than CAGR, which assumes one investment at the start and one value at the end.
Rajesh Khandagale, senior vice president for NPS at KFin Technologies, told Business Today that CAGR relies on “only a single starting value and single ending value over a given fixed period”. By contrast, XIRR is built to handle irregular cash flows, including deposits and redemptions made on different dates. Khandagale said that, because NPS allows investors to move money in and out at various points, “XIRR is a best way to represent the returns in NPS”.
The distinction is not unique to pensions. According to Mint and other personal finance explainers, CAGR is best suited to lump-sum investments, while XIRR is more appropriate when money is added or withdrawn over time, as in systematic investment plans. In practical terms, that means two investors can hold the same product and still see very different personal returns depending on when they entered, how much they contributed and whether they partially exited along the way.
That is also why PFRDA’s PRIDE-DISHA platform matters. Business Today said the regulator is using XIRR as part of its effort to give subscribers a more meaningful return measure, though the current version still does not amount to a full risk-adjusted assessment. Khandagale also said more features are planned, including returns for Tier II accounts, MSF schemes and NPS Vatsalya, along with rolling and trailing return calculations for different investment choices.
Those additions would give savers a wider lens through which to judge performance, especially in a system where fund results vary sharply by manager and time frame. As of July 27, 2026, Business Today reported that Tata Pension Management led long-term performance in NPS Scheme E, while Kotak and HDFC topped other periods. In Scheme C, HDFC led most horizons and SBI had the strongest since-inception return. In Scheme G, LIC and Aditya Birla Sun Life split the lead across different periods, while UTI stood out in the APY scheme. The broader lesson is clear: no single return figure tells the whole story, and for NPS the timing of cash flows can be just as important as the headline number.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
