What is your idea of a big monthly pension? Rs 1 lakh, Rs 1.5 lakh…. Well, a pension of Rs 2 lakh a month is almost beyond anyone’s expectation. Now think of a pension of Rs 5 lakh. Kidding? Not quite. If you find that incredible, you are advised to turn to NPS.
NPS investment: Start at 18 for highest benefits
The National Pension System, or NPS, is regulated by the PFRDA (Pension Fund Regulatory and Development Authority of India) that has been designed to offer a monthly pension and a lump sum to any contributor when he/she turns 60. One can start investing in an NPS account at 18 and continue till the age of 75. Let’s see how one can actually achieve a monthly pension of Rs 5 lakh.
NOS Calculator: Less than 5k/month for Rs 5L/month
Let’s think of a person who is farsighted enough to open an NPS account at the youngest possible age and start investing Rs 4,750 a month. If the person has the tenacity to keep investing, he/she will start getting a pension of – hold your breath – more than Rs 5 lakh every month when he/she turns 60. The actual figure, the NPS calculator tells us – is Rs 5,01,569.
Besides this incredible amount, the calculator tells us that the contributor is entitled to get a one-time payment of Rs 6.68 crore, which if invested properly can earn hefty interest.
Assumptions
There are a few assumptions in the above calculation, both on the conservative side. One, an annual return of 10% has been factored in the calculation. Experts say a higher return is achievable, in which case the amounts would increase. Also the return on the annuity (that is reserved for pension) is assumed at 6%.
Annuity between 40% and 60%
The point to note is that the contributor can buy annuity with anywhere between 40% and 60% of the total corpus generated. The above calculation of Rs 5 lakh pension is based on buying annuity with 60% of the corpus.
If one buys annuity with 40% of the corpus one will get a pension of Rs 3,34,379 or Rs 3.34 lakh. The one-time payment would stand at Rs 10.03 crore.
Total investment, total gains
The total investment that one would make from his/her pocket would Rs 32.49 lakh. The total corpus generated would amount to Rs 16,71,89,717 or Rs 16.71 crore. Therefore, the total gain would be Rs 16,39,40,717 or Rs 16.39 crore.
The National Pension System can uncork surprisingly high pension possibilities, thanks to the phenomenal power of long-term compounding. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
