NPS Pension Calculator – How is NPS Pension Calculated?

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NPS Pension Calculator

National pension scheme calculator is commonly referred to as NPS calculator. It is a tool to compute the amount of money receivable as a pension. Although most of the calculators display an estimate pension amount and may not display the exact figures. 

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Below are the details required for NPS calculator:
  • Current age and the age the individual wants to retire
  • The amount invested in NPS on a monthly basis
  • The number of returns expected by an individual
  • The number of years required to receive the pension after retirement

Minimum of 40% can be withdrawn at the age of 60 and a maximum of 80% can be withdrawn before the age of 60 years. After retirement, annuity investment is equal to the pension you will earn.

How NPS is calculated?

After filling the required details, the total corpus amount that will be displayed at the time of retirement is calculated. Compound interest per year is applicable and used in calculating the Corpus. A private or a government employee has to make monthly contribution in NPS scheme till he attains the age of 60, on this simple method NPS works. The national pension scheme calculators make a close estimate about the amount of the pension received by the subscriber on the basis of the age of the subscriber at the time of subscription, the monthly contributions he has made and all other perspectives. In general, is quite difficult to estimate the rate of the interest on the scheme because the contributions are invested in the form of equity, corporate debts & government securities, etc. The scheme had a rate of interest between 12-14% for the year 2012-13.  

However, the subscribers have to decide the amount and number of contributions he will make in NPS. The individual has the liberty to choose from the amount of the contributions as per their present and future financial standards. It is observed that the more amount invested will have a large corpus amount. Investment and corpus are interlinked therefore increasing the investment amount will surely increase the corpus. But to avail the NPS tax benefits, taxpayer prefers to invest on about 10% of their basic salary towards the NPS scheme.

Method of using NPS calculator

National pension scheme calculator can be used easily on the internet with the available free tools. Also, there are separate NPS calculators available from banks for their own use. Often these calculators calculate almost the estimated value correctly and are very easy to use. Online NPS pension calculator is simple to use and available free of cost.

Below are the steps for using the NPS calculator:
  • Mention the current age
  • Enter the age when the first NPS contribution was made 
  • Enter the retirement age.
  • The tool will automatically calculate the NPS amount by calculating the investing period and the age of the investor. For example, if your current age is 30, the retirement age is 60, then the total period will be counted as 30 years.
  • Now enter the amount you are paying per month in the scheme. 
  • The interest earned on a monthly basis is the compound interest. Mention the rate what you expect at the time of retirement. 
  • In the end, you will receive a summary of NPS investment with principal amount, interest earned, the wealth generated as pension and total tax saved.
  • Now to calculate the return you will get in annuity by using NPS calculator India. Input the percentage of pension and the rate of interest in the calculator.
  • The NPS return calculator will display a summary of lump sum amount that can be withdrawn, the pension amount invested and the monthly pension amount receivable post-retirement.

Details provided by the NPS pension calculator

NPS calculator displays all the investment details. It displays the total amount received at the time of maturity, the interest received and the total amount invested throughout the scheme period. The total amount withdrawn at every interval and the details of the amount invested by you per month are also shown on the national pension scheme calculator. As per the annuity, the amount that will be received after retirement is displayed on the NPS calculator.

Let us understand better with an example:

Mr Ajay, 27 years, working in an organization with a fixed salary structure. He adds Rs.1,000 monthly in NPS for 33 years till he attains an age of 60. He expects 10% p.a. return over his investment. With 40% at a rate of 6% interest, he plans to buy an annuity. 

Now, as per the assumed figures above, his status for the NPS return rate can be calculated as below:

Absolute investment amount – Rs.4,20,000 

Total corpus amount – Rs.38,28,277 

Annuity Amount – Rs.22,96,966 

Lump Sum Amount – Rs.15,31,311 

Month pension that will be received – Rs.7,657

 

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