The NPS is open to just about anyone. It is not necessary that a person has to be employed to invest open an NPS account and start investing for a neat monthly pension in the golden years of his/her life.
Anyone between 18 and 70 years old can open and start contributing to an NPS account. One can continue investment till 75. Therefore, one can invest for 57 years at a maximum.
Now let us see how much investment one needs to make throughout the maximum period to create a corpus adequate to pay a monthly pension of Rs 1 lakh and Rs 1.5 lakh. Let this person open an NPS account at 18 years of age.
To make the calculation the NPS calculator needs a few information. You have to type in the age when you want to start investing and the age till when you want to continue it. The longer you invest, the less you have to put in every month to reach the same goal.
There are a couple of assumptions. One, the rate at which you are expecting returns from the investment that you are making. For our calculation, let us assume it to be 10%, a fairly moderate one. Then let us assume, we would get pension at the rate of 6% from the portion of the accumulated amount which will be earmarked for pension payment.
Now, if the person invests only Rs 1,450 a month, he/she can get a monthly pension exceeding Rs 1 lakh – Rs 102,074 to be exact. The point to note is that this pension will be available if the contributor buys annuity with 40% of the accumulated corpus. The remaining 60% will be paid to him/her as a lump sum at the age of 60 years.
If he/she raises the annuity part to 50% of the corpus, the pension will rise to Rs 127,592. The other 50% or Rs 2,55,18,430 (Rs 2.55 crore) will be paid as a lump sum.
The contributor can easily settle for a pension of more than Rs 1.5 lakh a month, if he/she buys annuity with 60% of the accumulated amount. In this case, the monthly pension would come to Rs 153,111. The rest 40% — or Rs 2,50,08,062 (Rs 2.5 crore) will be paid to the contributor as a lump sum.
The National Pension System or NPS was launched in India in early 2004. It is quickly becoming popular as an instrument to build a secure corpus for post-retirement years. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
