NPS Calculator
NPS Calculator helps you check how much corpus you can build with National Pension System. It also helps you to determine the amount of monthly/annual pension that you might receive post retirement.
Disclaimer
The above calculation and illustration of figures are indicative only and not on actual basis.
Break up of Lump sum value and Amount to be invested in Annuity
Disclaimer
The above calculation and illustration of figures are indicative only and not on actual basis.
The National Pension System or NPS, introduced by the Ministry of Finance (Government of India), is a measure to ensure a degree of financial stability for Indian citizens after they have retired. It was previously known as the National Pension Scheme.
An individual invests in NPS during his working years, at the time of retirement, the accumulated amount can be withdrawn up to 60% and the rest has to be invested into an annuity scheme to get a regular pension.
What is a NPS Calculator?
An NPS Calculator, or National Pension System Calculator, is an online tool that helps individuals estimate their retirement corpus and potential pension payouts under the National Pension Scheme (NPS). By entering certain personal details, like your age and monthly contribution, the NPS pension calculator provides projections for the accumulated savings and post-retirement income you can expect.
This tool is especially helpful for those planning their retirement finances and wanting to understand the growth of their contributions over time in the NPS scheme.
How does the NPS Calculator Work?
The National Pension Scheme calculator works by taking a few essential inputs to compute the expected pension benefits and final retirement corpus:
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- Monthly or yearly contributions: The amount you regularly contribute to the NPS account.
- Duration of investment: The number of years until retirement.
- Expected rate of return: The annual growth rate of your investment.
- Annuity percentage: The portion of your retirement corpus you wish to use for purchasing an annuity.
Based on these inputs, the NPS calculator first estimates the total corpus you will accumulate by retirement. It then calculates the potential monthly pension based on the percentage of the corpus allocated towards an annuity plan, which provides a steady income post-retirement.
How to use the NPS calculator:
Using the NPS pension scheme calculator is straightforward. Here’s a step-by-step guide to help you navigate the process:
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- Input your current age: This determines how many years you have until retirement.
- Enter your contribution amount: This can be either monthly or annually, based on how you prefer to contribute to your NPS account.
- Select your retirement age: You can typically choose between 60 and 70 years as your retirement age.
- Set your expected rate of return: This is the percentage growth you expect from your NPS investments.
- Choose the annuity percentage: Decide what portion of your corpus will be used for the annuity, which will determine your monthly pension.
Once you fill in these details, the NPS calculator will generate two key results:
– The estimated total corpus by the time you retire.
– Your potential monthly pension after retirement.
Formula for NPS Pension Calculation
The NPS pension calculation is based on a compound interest formula that accounts for regular contributions and the accumulation of returns over time:
Future Value (FV) = P \[ (1 + r/n)^(nt) – 1 \] / (r/n)
Where:
– P is the regular contribution.
– r is the annual rate of return.
– n is the number of compounding periods per year (typically monthly).
– t is the number of years until retirement.
The formula calculates how your contributions grow over time, and the resulting corpus is used to determine your post-retirement pension.
Example of NPS Calculation
Let’s assume you’re 30 years old and plan to contribute ₹6,000 monthly to your NPS account. With an expected annual return of 8% and a retirement age of 60, you would have:
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- Monthly contribution: ₹6,000
- Investment period: 30 years
- Expected annual return: 8%
Using the NPS calculator, your total corpus at retirement would be around ₹91 lakhs. If you decide to allocate 40% of this corpus to an annuity, you could receive a monthly pension of approximately ₹30,000 after retirement.
Who can use the NPS Calculator?
The National Pension Calculator is a versatile tool that can be used by:
- Salaried professionals looking to plan for retirement.
- Self-employed individuals who want to build a pension corpus.
- Young investors starting early on retirement planning.
- Financial advisors helping clients estimate their retirement needs.
- Anyone aged 18 to 65 who is eligible for the National Pension System.
Benefits of using the National Pension Scheme Calculator
- Retirement Planning Made Easy: The NPS scheme calculator helps you estimate your future savings and pension, allowing for better financial planning.
- Flexible Inputs: Customize the parameters to see different scenarios and understand how varying contributions, returns, and annuity investments affect your retirement.
- Instant Projections: Get quick, real-time estimates of your potential retirement corpus and pension, helping you make informed decisions.
- Enhanced Clarity: Understand how your contributions will grow over time, giving you a clear picture of your financial security after retirement.
- Accessible to All: Whether you’re a new entrant to the workforce or nearing retirement, the NPS pension calculator offers valuable insights to anyone planning for their future.
By using the National Pension System calculator, individuals can take control of their retirement planning and gain clarity on how the NPS pension scheme can provide financial security in their post-working years.
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FAQs on National Pension Scheme Calculator
Q: What is the current interest rate of NPS?
A: The current interest rate for NPS is not fixed. It varies depending on the chosen asset class (Equity, Debt, and Government Securities) within your NPS account. The estimated returns are 12% for Equity, 8% for Debt, and 7% for Government Securities. Remember, these are estimates, and actual returns may vary.
Q: Does the NPS calculator assist in calculating the tax amount on withdrawals?
A: No, the NPS calculator does not calculate the tax amount on withdrawals. However, it provides the estimated corpus and pension amount, which can help you understand your potential tax liability based on applicable tax laws. Please consult a tax advisor for personalized guidance.
Q: Is NPS calculated monthly or yearly?
A: Your NPS contributions are typically made monthly, but the interest accrual and corpus growth are calculated annually. The NPS calculator considers this annual compounding while estimating your future corpus and pension.
Q: Is the NPS calculator applicable for all types of NPS accounts?
A: Yes, the NPS calculator is applicable for all types of NPS accounts, including Tier I (individual accounts) and Tier II (corporate accounts). The calculation considers the specific contribution limits and investment options applicable to each tier.
Q: Can I use the NPS calculator to plan for my retirement?
A: Absolutely! The NPS calculator is a valuable tool for retirement planning. It helps you estimate the future value of your NPS corpus based on your current contributions and expected investment returns. This information can help you assess if you’re on track to meet your desired retirement income.
Q: What information do I need to use the NPS calculator?
A: To use the NPS calculator effectively, you’ll need:
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- Your current age: This helps determine your investment horizon.
- Your desired monthly contribution: This is the amount you plan to contribute regularly.
- Expected rate of return: Choose the estimated return based on your chosen asset allocation (Equity, Debt, etc.).
- Investment period: This is the number of years you plan to contribute before retirement.
- Desired retirement age: This helps determine the duration of your pension payout.
Q: What is the minimum contribution for Tier I and Tier II NPS subscribers?
A: The minimum contribution for Tier I NPS is ₹6,000 per year, while there is no minimum for Tier II accounts. However, Tier II contributions cannot exceed your employer’s contribution limit.
Q: What is the maximum contribution for Tier I and Tier II NPS subscribers?
A: The maximum contribution for Tier I NPS is 10% of your basic salary (including Dearness Allowance) or ₹2 lakh per year, whichever is lower. Tier II contributions are subject to your employer’s specified limit.
Q: Does the pension maturity value vary between tier-1 and tier-2 cities?
A: No, the pension maturity value depends solely on your total contributions, investment returns, and chosen annuity options, regardless of your city. Location does not influence the NPS calculations.
Q: How do I get a ₹10,000 NPS pension per month after retirement?
A: Use the NPS calculator to input your desired monthly pension and retirement age. Then, adjust your monthly contribution amount until the calculator displays a corpus value that, when converted to a pension using the annuity option you choose, provides ₹10,000 per month. Remember, this is an estimate, and actual returns may differ.
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Returns under NPS are subject to market risk based on the status of the financial market. Current returns of the company does not guarantee same returns in the future. Kindly consult your CA/Financial Advisor to know more about the market and returns.