NPS Calculator: The National Pension System, which is a government-backed scheme, aims to provide social security to citizens of India after retirement. The scheme allows people to make monthly contributions to save for post-retirement life. It was launched in January 2004 for government employees. Later, in 2009, it was opened to all sections. It brings an attractive long-term saving avenue to effectively plan your retirement through safe and regulated market-based returns.
Who Can Open NPS Account?
A New Pension Scheme account can be opened by:
– A citizen of India, whether resident or non-resident
– Applicant should be between 18 to 70 years of age as on the date of submission of his/her application and
– Applicant should comply with KYC norms prescribed by the scheme
Types of NPS Accounts
Under the NPS, there are two types of accounts — Tier 1 and Tier 2. Tier 1 account is mainly meant for retirement savings where one has to make a minimum contribution of Rs 500 while opening the account. It also entails tax benefits under Section 80CCD (1B) of the Income Tax Act, 1961.
NPS Tier 2 is an open-access account. It requires a minimum investment of Rs 1,000, where the subscriber is free to withdraw his/ her entire corpus at any point in time. No tax benefits are available in this account.
How Can You Get Rs 1,50,000 Pension Per Month?
If a person joins the NPS at the age of 20 and starts contributing Rs 6,000 a month till the age of 65 years. The total contribution will be Rs 37.8 lakh. Given the expected 10 per cent return annually, the total investment will grow into Rs 7.39 crore. Now, if the NPS subscriber converts 40 per cent of the corpus into an annuity, the value will be Rs 2.95 crore. Assuming the annuity rate of 10 per cent, the monthly pension can be Rs 1.47 lakh. Not only this, the NPS subscriber will get a lumpsum amount of about Rs 4.44 crore.
How Much Risk Is There In NPS?
Recently, the PFRDA made it mandatory for fund managers to assign ratings based on risk level of the NPS scheme. The new rules mandate six levels of risk — Low Risk, Low to Moderate Risk, Moderate Risk, Moderately High Risk, High Risk, and Very High Risk. Based on the scheme characteristics, pension funds shall assign risk levels for the Schemes E-Tier 1, E-Tier 2, C-Tier 1, C-Tier -2, G-Tier-1, G- Tier-2 and Scheme A, according to a PFRDA circular.
The ratings system will help subscribers have a better idea of the risk involved in their investments under the NPS. They will be able to take a better decision on the allocation of investment to various asset classes schemes at the time of enrolment into the scheme and at the time of making subsequent contributions to the schemes.
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