look news india
National Pension Scheme (NPS) is a retirement scheme, by investing in which you can get a monthly pension of ₹1 lakh at the age of 60. A monthly investment of ₹13,100 from the age of 25 and an expected return of 10% can lead to a corpus of ₹5 crore at retirement, of which 40% will be reserved for pension in the form of annuity.
New Delhi. The National Pension Scheme (NPS) is a retirement-cum-savings plan that works on a contribution-based system. Its main objective is to provide financial security to people after retirement. The most important thing about NPS is that it does not guarantee any fixed benefit. Your pension amount is decided on the basis of the investments you make and the returns you get on it.
After retirement, your income stops but expenses increase or remain the same. In such a situation, a stable income source is required to maintain financial independence. If you want a monthly pension of ₹ 1 lakh after retirement, then you will have to invest regularly in NPS. Let us know its mathematics.
Suppose you are 25 years old and you are starting to invest in NPS. You will invest till the age of 60 years, i.e. the investment period will be 35 years. Here it is assumed that you will get 10% returns on NPS, which is a normal expectation.
Monthly Investment: ₹13,100
Total investment (over 35 years): ₹55.02 lakh
Total Return: 10%
Mutual Fund Maturity Amount: ₹5.01 Crore
Annuity Investment: 40% (₹2 Crore)
Estimated Annuity Rate: 6%
Monthly pension after retirement: ₹1 lakh
What is annuity?
In NPS, you have to invest at least 40% of your total deposit in annuity scheme. The higher the annuity rate, the higher will be your monthly pension. You also get tax exemption of up to ₹ 50,000 on this investment under Section 80CCD(1B) of the Income Tax Act.