The National Pension Scheme (NPS) is a social security programme established by the Union Government with the goal of providing citizens with a consistent income once they retire. The PFRDA, India's regulator of pension funds, has made various regulation modifications to the system over the years in order to make it more appealing to regular investors. Because it is a hybrid investment scheme (which invests in both stock and debt), experts believe it can help young workers build up a significant retirement fund by contributing modest sums every month.
If you've put off saving for retirement and are now 35 years old, you may still invest in the NPS. Let's look at a computation to see how much you'll need to save for a Rs 50,000 monthly pension.
Understand How to Calculate Funds
If the investor's average age is 35 years. He contributes Rs 15,000 every month to this fund. The investor must invest until he or she reaches the age of 60, or for a period of 25 years.
NPS investment: Rs 15,000 per month
In all, Rs 45 lakh has been contributed over a period of 25 years.
Return on investment is expected to be 10%.
The total amount payable on maturity is Rs 2 crore.
Purchase of annuities: 50%
The annuity rate is estimated to be 6%.
Pension at 60 years old: Rs 50,171 per month
(Note: The NPS Trust Calculator was used for this computation.) This is a approx. figure. Actual numbers may differ.)
How to accumulate total payment of 1 crore
If you accept a 50% annuity under NPS (a minimum of 40% is necessary) and the annuity rate is 6% per year, you would receive a lump amount of Rs 1.0 crore after retirement, with Rs 1 crore going into an annuity. You will now receive a monthly pension of Rs 50,171 from this annuity amount. The larger the annuity, the more the pension you would receive.
An annuity is, in reality, a contract between you and the insurance provider. An annuity of at least 40% of the amount in the National Pension System must be purchased (NPS). The pension amount will be higher if the sum is larger. After retirement, the annuity amount is paid in the form of a pension, and the remainder of the NPS can be withdrawn in a lump payment.
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