The National Pension System, popularly referred to as NPS, is a powerful tool that creates a monthly pension and a lump sum payout when a person turns 60. (However, under certain circumstances, money can be withdrawn earlier too.) It takes contributions from subscribers and is designed to invest the funds in the long-term, use the power of compounding to multiply the amount may times over, and create a corpus ready for the beneficiary when he/she turns a senior citizen.
The most significant point about the NPS is that the beneficiary can be just about anyone and there is no need for him/her to have a regular income. You can easily use this facility to conveniently create a big corpus – both a lump sum and a monthly pension when she turns 60. You can check the power of small contributions to the NPS using the online NPS calculator.
What is NPS and its benefits: Let your wife discover
Suppose your wife is 25 years old now. If you open an NPS account for her, start contributing only Rs 2,500 a month in it and keep on doing so till the age of 65, it will generate an incredible amount of Rs 1,59,41,951 (Rs 1.59 crore) for her. NPS will use this amount to pay her a one-time lump sum of Rs 95,65,171 (Rs 95.65 lakh) and pay a monthly pension of Rs 31,884 from the rest of the amount Rs 63,76,780.
NPS rules about annuity and lump sum
The assumption here is that an annuity will be bought with 40% of the entire corpus that will generate the monthly pension. If one buys annuity with 60% of the corpus, the amount of pension will jump to Rs 47,826, while the lump sum will go down to Rs 63,76,780 (Rs 63.76 lakh). The rules state that one has to buy annuity with at least 40% of the total corpus. One can raise this share of annuity to 60%. The lump sum amount will commensurately go down.
NPS Vatsalya for your kid
The NPS scheme has been given a remarkable extension recently by Finance Minister Nirmala Sitharaman. Now you can create an NPS account for your minor kid and take advantage of the power of compounding from childhood. It can create crores and crores if you start investing a few thousand rupees from the initial years.
The National Pension System (NPS) has paved the way for a universal pension for Indians by taking contributions from the beneficiary for a long time, over which the amount is compounded. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
