NPS Calculator: National Pension System or NPS Scheme is giving tough competition to the Public Provident Fund (PPF) as investors want to earn more for their retirement fund and they are ready to take some limited risk for that as well. For those investors, who have some moderate risk appetite, an NPS account is a better option than PPF account, especially if the investment is for creating a retirement fund. According to tax and investment expert Jitendra Solanki, PPF account is completely risk free debt fund while NPS Scheme is market linked where the NPS contribution goes in both equity and debt mode.

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Speaking on the NPS Scheme; SEBI registered tax and investment expert Jitendra Solanki said, "NPS gives an investor to choose equity and debt proportion as one can choose up to 75 per cent equity mode in NPS account. However, in my view, one should go for the 60:40 equity-debt ratio as it minimises the risk factor and maximises the possibility of higher returns."

On how this 60:40 ratio will lead to NPS interest rate earned, Solanki said, "For long-term, one can expect to get at least 12 per cent return while in debt there is a flat 8 per cent return. On the basis of that one's equity investment of 60 per cent will fetch around 7 per cent return in 30 years while the debt mode NPS returns will be around 3 per cent i.e. around 10 per cent net NPS return."

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Solanki said that after the investor becomes 60 years of age, he or she can withdraw up to 60 per cent of one's net NPS balance and buy annuity of the rest 40 per cent adding, "Your annuity will result in the monthly pension and the return one will get on one's annuity will decide one's monthly pension. However, one can expect 6-7 per cent annual return on one's annuity."

Assuming the above-mentioned NPS Scheme strategy, if an investor invests Rs 3,000 per month for 30 years, the NPS calculator suggests that one will get Rs 41,02,786 lumpsum amount and Rs 13,676 monthly pension. So, in short, if a person invests Rs 3,000 per month saving Rs 100 a day, he or she will be able to get Rs 41,02,786 lumpsum amount at the time of retirement and at the same time will be able to create an avenue for monthly money to the tune of Rs 13,676 as well.

Source: National Pension System Trust

This NPS calculator has kept annuity at 40 per cent and the net annual return on annuity at 6 per cent, which Solanki said will be the least annual return on one's annuity.