NPS: Rs 15,000 monthly investment from 30 years of age, Rs 2.50 crore corpus at 60 and Rs 80,000 pension; understand this calculation
The National Pension System (NPS) offers retirement security with monthly pensions, a lump sum corpus, tax benefits, and a 40% annuity. It’s an affordable, government-backed retirement plan with steady returns.
The National Pension System (NPS) is a government-backed retirement plan that offers financial security through monthly pensions and a lump sum corpus at retirement. With investments as low as Rs 15,000 per month, NPS provides an estimated return of 10% and tax benefits under Section 80C and 80CCD (1B). A mandatory 40% annuity purchase ensures steady post-retirement income. Ideal for retirement planning, NPS is managed by PFRDA-registered pension fund managers, offering a balanced investment approach.
NPS: Investment Overview
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Monthly Investment: Rs 15,000
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Investment Age: Start at 30
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Maturity Age: 60
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Total Contribution (30 years): Rs 54,00,000
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Expected Return on Investment: 10%
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Maturity Corpus: Rs 3.41 crore
Monthly Investment: Rs 15,000
Investment Age: Start at 30
Maturity Age: 60
Total Contribution (30 years): Rs 54,00,000
Expected Return on Investment: 10%
Maturity Corpus: Rs 3.41 crore
Annuity & Lump Sum Breakdown
- Annuity Purchase: 40% of the corpus
- Amount: Rs 1.36 crore
Lump Sum Withdrawal
- Amount: Rs 2.5 crore
- Annuity Rate (Estimated): 7%
- Monthly Pension (from age 60): Rs 79,776
NPS calculation explained
If you invest Rs 15,000 monthly in the National Pension Scheme (NPS) from the age of 30 until 60, your total contribution over 30 years will be Rs 54 lakh. Assuming an annual return of 10%, your maturity corpus will grow to around Rs 3.41 crore. Out of this, Rs 1.36 crore (40% of the corpus, which is the minimum required) will be used to purchase an annuity at an estimated 7% annuity rate, providing a monthly pension of Rs 79,776. Additionally, you will receive a lump sum amount of Rs 2.5 crore at retirement.
Importance of Annuity
- Higher Annuity: Larger annuity results in a higher monthly pension.
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Fund Management: Pension fund managers registered by PFRDA manage NPS investments, allocating funds in equity, government, and non-government securities, as well as fixed income instruments.
Fund Management: Pension fund managers registered by PFRDA manage NPS investments, allocating funds in equity, government, and non-government securities, as well as fixed income instruments.
Annuity Requirement in NPS
- Mandatory Annuity: At least 40% of the NPS corpus must be used to purchase annuity.
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Pension Source: Pension payments are generated from the annuity, while the remaining NPS amount can be withdrawn as a lump sum.
Pension Source: Pension payments are generated from the annuity, while the remaining NPS amount can be withdrawn as a lump sum.
Tax Benefits
Additional Deduction (Section 80CCD 1B): Investments in NPS up to Rs 50,000 are eligible for tax deductions beyond the Rs 1.5 lakh limit under Section 80C.
No Guaranteed Pension
Pension amounts are based on estimated returns. It's advisable to consult a financial advisor before making any investment decisions.