NPS Calculator: The National Pension System (NPS) is one of the popular financial instruments that ensures a regular income post retirement for citizens. The NPS was initially launched for government employees, except armed forces, in 2004, but it was later extended to people working in the unorganised sector as well, though on voluntary basis.
The NPS – a market-linked defined contribution scheme aimed at saving for retirement – was started with an aim of initiating pension reforms and inculcating the habit of saving among people for retirement years. Effective May 2009, the NPS was opened to all citizens of the country.
Regulated under the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013, the NPS is voluntary for subscription by an individual to make contributions to his or her individual pension account during the working life for creating a pension corpus from which regular income will be generated after retirement/working age.
For a comfortable monthly retirement income, one should invest a good amount and also start early to make a good corpus while working. Many NPS subscribers would be wondering how much they need to invest monthly to get at least Rs 1 lakh per month as pension.
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How much should you invest in NPS to get Rs 1 lakh pension every month?
To receive a monthly income of Rs 1 lakh after retirement from NPS investments, consider the following scenarios:
-Starting at age 35, with investments growing at 10% annually, and retiring at age 60.
-If 80% of the corpus is used for an annuity yielding 6% annually, a monthly contribution of Rs 17,000 is needed.
-Using 40% of the corpus for the annuity requires a monthly contribution of Rs 34,000.
-In both cases, the monthly income post-retirement would be Rs 1 lakh.
Who all can invest in NPS?
All citizens aged between 18 years and 70 years can take an NPS plan (voluntary model). The NPS is an efficient method to enhance retirement income while offering tax benefits. By enabling systematic savings, the NPS allows individuals to plan for a financially secure retirement with disciplined savings.
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Benefits of NPS:
1. Flexible investment modes cater to diverse investor preferences.
2. Simplified and tax-efficient savings vehicle for retirement.
3. Portability allows seamless transfer of funds across jobs and locations.
4. Regulated and transparent management under PFRDA oversight.
5. Offers the dual advantage of low-cost management fees and compounding returns.
6. Provides convenient online access for easy management and monitoring.
Tax benefits:
NPS is a cost-effective investment option for building a retirement fund. The scheme also offers an additional tax deduction of Rs 50,000 under section 80CCD, in addition to the existing Rs 1.5 lakh deduction available under Section 80C of the Income Tax Act, 1961.