Calculation Of The National Pension Scheme

The NPS calculator is an instrument that you can use to calculate pension when you invest in a particular period in the National Pension system and accumulate at the age of 60. The National Pension System (NPS) is an alternative pension scheme that can be invested by any Indian resident between the age of 18 and 60 years. The returns produced by the National Pension System are not guaranteed because your cash is invested in various market-related instruments. Hence, the conclusions are the estimates given by the NPS maturity value calculator.

Why we use the NPS Calculator?

The National Pension System is a government-backed investment, resulting in no guaranteed returns from this investment. Using the NPS calculator, when you reach retirement age, i.e., 60 years, you can estimate the amount you can deposit as an NPS retirement fund. Further, you are not allowed to withdraw the entire amount at maturity under current NPS rules and you are required to purchase at least 40 percent of your accumulated NPS corpus upon retirement. The remaining 60% of the corpus can be withdrawn as per the relevant NPS taxation rules.

After retirement, annuity purchases serve as a source of pension revenue, so estimating your early retirement corpus will play an essential role in determining the NPS client’s monthly post-retirement pension. Alternatively, you can calculate the amount needed to save periodically to achieve the target pension corpus using the NPS calculator.

The formula for calculating NPS calculator

In the National Pension System account, the NPS calculator formula for calculating future corpus is based on the following areas:

NPS subscriber age – You are needed to enter your birth date in the NPS calculator to calculate the contribution years in the system automatically.

Invest in NPS every month. – It is a monthly estimate amount that you plan to invest in the plan.

Expected return on investment in NPS – The amount you invest in NPS is selected in select tools that are market-linked. As it is certainly not possible to predict yields from market-linked instruments, you will need to input the expected return on investment (ROI) from your NPS account.

Expected Annuity Rate – At the date of retirement, you are required under the current NPS guidelines to purchase an annuity worth at least 40% of the accumulated wealth. The annuity purchased provides for pension income as well as the buyer of the annuity. Therefore you need to enter the required RoI annuity in the NPS calculator.

NPS calculator results

The results of the NPS calculator include the following:

  • The total principal amount invested in NPS account

  • Entire corpus obtained based on expected ROI in retirement.

  • The total amount of annuity to be purchased at maturity.

  • The total available amount at maturity for lump-sum withdrawal.

  • Calculated monthly pension post-retirement based on annuity purchase.

How to Invest in the NPS?

The national pension system can be invested through two major routes – online and offline. Following are some of the significant online avenues for investing NPS:

  • Through notified bank websites that were allowed to offer the NPS investment option.

  • Through Karvy or NSDL’s website.

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