NPS Calculator Last Updated : 21 Sep 2019

NPS Calculator
NPS Calculator

The National Pension Scheme calculator is a tool that enables an individual to compute the amount of money they will potentially receive as pension. All calculators only show an estimate of the potential pension and not an exact figure.

Who can use the NPS Calculator?

Individuals who are eligible to invest in NPS scheme can use the NPS calculator. According to the NPS rules, Indian citizens between the ages of 18 years and 60 years are eligible to invest in the scheme. However, individuals must submit the relevant Know Your Customer (KYC) documents in order to invest in the scheme.

For more information, Check out related articles NPS, NPS Tier 1, NPS Tier 2 & PFRDA

How to use NPS calculator?

Calculators are found widely across the internet and certain banks even offer calculators of their own. These calculators offer close estimates and are very easy to use. This online tool is quite simple to use and can be used any number of times for free. Here is a step-by-step guide on how to use the NPS calculator:

  1. First, enter your current age or the age at which you start making contributions towards NPS.
  2. Then, input your retirement age which is usually 60 years.
  3. Depending on the age at which you begin NPS contribution, the total investing period will be automatically tabulated by the tool. For example, if your current age is entered as 35 and the retirement age is 60, then the total investing period will be 25 years.
  4. Enter your monthly contribution towards NPS, it can be as low as Rs.1,000.
  5. The interest earned is on monthly compounding basis. Enter the expected rate of interest or return on your NPS investment.
  6. Finally, you will get a summary of your NPS investment with details such as:
    • Principal amount
    • Interest earned
    • Pension wealth generated
    • Total tax saved
  7. To find out how much returns you will get from investing in annuity, input the percentage (%) of pension wealth to be invested in annuity and the rate of interest on annuity in the tool.
  8. You will get a summary of the lump sum amount withdrawn, pension amount invested, and pension per month post retirement.

How NPS Calculator Works

Once the above-mentioned details are entered, the total corpus that is accumulated at the time of your retirement will be shown. The interest that is earned is compounded yearly and will be used in calculating the corpus.

The way the NPS works, is that the subscriber be it a private employee or a public servant needs to make monthly contributions from the time of subscription till the subscriber attains the age of 60. Based on how much the age of the subscriber was at the time of subscription and the monthly contributions made, the National Pension Scheme calculator makes close estimates of how much pension that subscriber can stand to receive. Since the contributions made towards this scheme is invested in equity, corporate debt and government securities it is quite difficult to exactly estimate the rate of interest earned by the scheme. For the year 2012-13, the scheme had interest rates varying from 12% to 14%

Subscribers of the national pension scheme are however at an advantage as they alone can decide the number of contributions they need to make towards the scheme. The subscribers can choose the amount based on the financial commitments they have at present or based on the corpus they look forward to during retirement. The sole responsibility of coming up with an amount for contribution rests with the subscriber. Generally, the more money invested, the larger will be the corpus. Subscribers, however, tend to make contributions that are at least 10% of the basic income and dearness allowance. This is to avail tax benefits of NPS.

Investment Details of NPS Calculator

All your investment details are shown by the NPS calculator. The total amount earned at the time of maturity, the interest earned, and the total amount that has been invested by you are shown as well.

Details such as the amount invested by you to earn a monthly pension and the total amount that is withdrawn by you are also shown. According to the returns that you expect at annuity, the NPS calculator shows the monthly pension that you will receive.

Illustration

Example 1:

Here is an illustration to help you understand how NPS calculator works.

Ms. Vandana is a 25-year old salaried employee at a reputable organisation. She contributes Rs.1,000 per month towards NPS for 35 years (until she reaches retirement at the age of 60). She expects a return on investment of 10% p.a. She also has plans to purchase annuity for 40% and expects an annuity rate of 6%.

As per the figures mentioned above, the status of her pension account at retirement is as follows:

Total investment - Rs.4,20,000

Total corpus - Rs.38,28,277

Therefore, her pension corpus at retirement is as follows:

Annuity Value - Rs.22,96,966

Lump Sum Value - Rs.15,31,311

Expected monthly pension - Rs.7,657

Example 2:

Mrs. Muktaman aged 35 contributes towards NPS, the scheme reaches maturity when she attains the age of 60 so that leaves her with 25 years of contributing time.

Let us assume the contribution made is Rs.2,000 per month and the expected interest or rate of return is taken as an average of 8%. Then the calculator will show vital stats such as:

Total invested principle – Rs.6,00,000

Interest earned (which is compounded monthly) - Rs.12,98,372

Total pension wealth generated – Rs.18,98,372

Total tax saving is Rs.1,80,000

If she makes a withdrawal of a lump sum of 40% and invests the remaining 60% of the pension wealth into the annuity plan with the expected interest rate of 8%, the subscriber stands to earn:

Monthly pension - Rs.7,593

Lump sum withdrawn – Rs.7,59,349

*Note - The calculation in this illustration is not absolute, the figures are indicative only.

Other reasons affecting the accuracy of such NPS calculators are the fact that tax laws may change and have an effect on the return on investments and the calculator also does not take into account the miscellaneous charges of the scheme.

FAQ’s

  1. How is Tier I different from Tier II?
  2. In case of Tier I, until the subscriber reaches the age of 60 years no withdrawal can be made, but for Tier II, withdrawal from his/her balance can be made anytime the subscriber wishes.

  3. For Tier I subscribers, what is the minimum contribution?
  4. The minimum contribution at one time is Rs.500 and Rs.1,000 per financial year.

  5. For Tier II subscribers what is the minimum contribution?
  6. The minimum contribution at one time is Rs.250. Minimum balance is not required.

  7. Is there any maximum contribution that must be made in a year?
  8. No, as of now there is no upper limit.

  9. Is there any transaction cost that is borne by the subscriber?
  10. Ad valorem of 0.25% of the total amount that is contributed. A maximum up to Rs.25,000 and a minimum of Rs.20 plus service tax.

  11. What happens to the accumulated corpus if the subscriber dies before the age of 60?
  12. The nominee or legal heir of the subscriber will get 100% of the accumulated corpus should the subscriber die before the age of 60, and there would not be any purchase of Monthly/Annuity Pension.

  13. Is there any limit to the number of nominations that can be made in an account?
  14. A total of 3 nominations can be made in an account.

  15. When the subscriber reaches the age of 60, can the entire amount be withdrawn?
  16. A maximum of 60% of the amount can be withdrawn when the subscriber reaches the age of 60. However, until the age of 70, the subscriber can remain invested. The remaining 40% will have to be annuitized at the end of the contribution year. There is also an option to annuitize 100% of the corpus.

  17. Is there any minimum number of contributions that should be made in a year?
  18. Yes, at least 1 contribution must be made in a year.

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