NPS Calculator: With the government adding more features and benefits to the National Pension System (NPS), the savings-cum-retirement scheme is getting more popular day-by-day. The NPS is a market-linked defined contribution scheme aimed at saving for retirement. The scheme was launched for government employees initially as part of pension reforms and to help people develop the habit of saving for their retirement years. Effective May 2009, the NPS was opened to all citizens of the country.

Initially, the NPS started covering government employees, except armed forces, in 2004. It was later extended to employees of the unorganised sector as well, though on voluntary basis. Regulated under the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013, the NPS is a voluntary retirement pension scheme under which an individual makes contributions to a pension account until the superannuation age and create a corpus, which gives him or her a regular income post retirement.

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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.

As inflation rises every year, the value of money keeps falling year after year. Considering this, most NPS subscribers would be wondering that how much they need to invest to get a monthly pension of Rs 1 lakh per month. Let us understand this with this example.

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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.

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.