National Pension Scheme is a pension scheme introduced by the Government of India. The system is based on the contribution made by the employees, which you can receive after retirement. You need to invest according to your investment objective, and you receive a fixed amount of pension at the time of vesting, i.e. when you start receiving your pension.
The NPS calculator helps you calculate and estimate the total investment you can accumulate. It will show the total amount of investment you are planning to accumulate, the expected returns in the same and the total maturity amount that you can receive.
How does the National Pension System Calculator work?
The NPS (National Pension System) Calculator helps people to find out how much they can get from the National Pension Scheme. It calculates the amount based on the person’s age, salary, and a number of years in service. The calculator is not a replacement for professional advice, but it can estimate what a person’s pension might be like.
In addition, the calculator provides a detailed breakdown of all the significant information required for calculating the National Pension Scheme.
The NPS calculator helps you to get an estimate of your pension amount at the time when you wish to retire based on your current contribution towards the NPS Scheme and your current age, along with the portfolio you wish to choose while investing, such as Aggressive, Moderate or Conservative. For example, the expected return on investment in an Aggressive portfolio is about 14% CAGR. In contrast, in a moderate portfolio, it is considerably less at about 12% CAGR, and in a balanced portfolio, it is considered to be at about 10% CAGR. You can also customise your portfolio as you can choose your investment funds in an NPS Scheme based on your risk appetite and asset allocation.
How to calculate your total estimated annuity amount with the help of an NPS Calculator?
The annuity calculator can help you calculate your estimated total annuity. The NPS calculator is designed for people considering a deferred annuity, a type of life insurance that pays out a fixed sum of money to beneficiaries yearly.
The calculator considers the age at which you start receiving payments and the length of time you receive them. The inputs are as follows:
- Your current age
- Your estimated retirement age is considered to be 60 years
- Your current contribution toward the NPS Scheme
- The expected portfolio return of your NPS investment
- Whether you wish to increase your contribution over the years
- The type of annuity you wish to opt for at the time of retirement
All these factors would be considered to provide an approximate amount of pension you would receive at the time of vesting.
Let us take an example:
Say you are 25 years old and you wish to retire at 60 years of age. Your current monthly contribution towards your NPS Scheme is Rs 20,000.
- Then in the Aggressive Investment Strategy, you would be able to accumulate Rs 22.46 CR by investing only Rs 84 lakhs. By opting for an 80% pension from your accumulated corpus, you would be able to get Rs 9.89 lakhs of pension per month!
- The amount drops drastically in the Moderate Investment Strategy, as your accumulated corpus would be Rs 12.99 CRs and your monthly annuity at the 80% option would be Rs 5.72 lakhs.
- For the Conservative Investment Strategy, your accumulated retirement corpus would be Rs Rs 7.66 CR, and your monthly pension would be Rs 3.37 lakhs if you happen to choose the 80% pension option.
You can change the parameters yourself and vary the results with the help of the NPS Calculator.
Points to remember while using an NPS calculator:
The NPS calculators are available online to help you calculate your expected pension.
The first step is to feed the specific details into the calculator. To start with, you can opt to provide the following details:
- Your age and the age at which you have opted to retire need to be carefully decided, as the power of compounding only works in the long run.
- The amount you decide to invest every month can be changed to get the desired pension amount which would help you have a comfortable retired life.
- Expected returns to earn from your NPS investment are not guaranteed. So, it is better to be conservative in your calculations so that your returns exceed your expectations because the other way around might not be a great experience!
- The annuity period is the total amount of years over which you opt to receive the monthly payment after retirement. You have to mention the total number of years you are planning to receive the amount over the years.
- Just remember that total percentage of pension amount that you opt for investment for the accumulated corpus that you opt for purchasing the pension plan. This amount generally cannot be less than 40% in case you opt to withdraw at the age of retirement of 60 years or more. If you withdraw the complete amount before retirement age, then the total figure cannot be less than 80%.
- Another important aspect is the amount of return expected, which you plan to expect at the time of annuity investment. This is the amount you plan to earn from the annuity investment after retirement.
Once you keep these points in mind, you will be able to get the desired pension amount from your investments in the NPS Scheme with the help of an effective NPS Calculator.