NPS: What will be your monthly pension if you start Rs 10K contribution at 25, 30, or 35 years of age?
Deposits in the NPS provide tax relaxation of up to Rs 1.50 lakh in a financial year under Section 80CCE of the Income Tax Act of India. Tier-I account holders can get an extra Rs 50,000 in tax benefits under Section 80CCD (1B).
NPS Retirement Scheme: The National Pension Scheme (NPS) is a retirement pension scheme where one contributes to their NPS account every month and gets a lump sum at about 60 years of age and a monthly pension after that. The scheme, which started in 2004 for central government employees, is now open to state government employees as well as private sector employees. The scheme is market-linked, where one can select fund managers and schemes based on their risk appetite. It has Tier-I and Tier-II accounts, where the Tier-I account matures at retirement age. Deposits in the scheme provide tax relaxation of up to Rs 1.50 lakh in a financial year under Section 80CCE of the Income Tax Act of India. Tier-I account holders can get an extra Rs 50,000 in tax benefits under Section 80CCD (1B). The scheme provides compound growth, so even if one contributes a small amount of Rs 10,000 every month and invests it for over 20 years, they can get a monthly pension of over Rs 1 lakh. Know what a Rs 10,000 monthly contribution to the scheme can help you get at retirement if one starts investing at 25, 30, or 35 years of age.
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NPS conditions
Before we start our calculation, let's assume a few things: that you will get 10 per cent annual returns on your NPS contributions, and that at 60 years of age, you will withdraw 40% of your fund and purchase annuities from the rest of the 60% amount. You will get a 6% return on your annuity investment and a monthly pension.
NPS: If you start at 25 years of age
If you start at 25, your total contributions in the next 35 years will be Rs 42,00,000.
NPS: If you start at 25 years of age
Your total gains will be Rs 3,40,82,768, of which you will withdraw Rs 1,53,13,107 at retirement and purchase annuities of Rs 2,29,69,611. With that calculation, your monthly pension will be Rs 1,14,848.
NPS: If you start at 30 years of age
Your investment in the next 30 years will be Rs 36,00,000, while the total gains will be Rs 1,91,93,254.
NPS: If you start at 30 years of age
You will withdraw Rs 91,17,302 as a lump sum and invest Rs 1,36,75,952 in annuities. This investment will give you a monthly pension of Rs 68,380.
NPS: If you start at 35 years of age
You will invest a total of Rs 30,00,000 in the next 25 years. Your total gains till retirement will be Rs 1,03,78,904.
NPS: If you start at 35 years of age
You will withdraw Rs 53,51,562 as a lump sum, and Rs 80,87,342 will go into purchasing annuities. It will give you a monthly pension of Rs 40,137.
What to do get more NPS monthly pension
Your monthly pension can be much more if you don't withdraw lump sum at retirement. E.g. Given the same conditions as mentioned above, starting at 25 years of age, if you purchase annuities of your entire corpus at 60, instead of Rs 1,14,848, you can get a monthly pension of Rs 1,91,414