Pension Calculator

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National Pension Scheme, popularly known as NPS, refers to an investment cum pension scheme introduced by the Indian Government in 2004. Administered and regulated by the Pension Fund Regulatory and Development Authority (PFRDA), this financial scheme aims to instil the habit of saving for retirement. In addition, the National Pension scheme offers exceptional long-term savings opportunities so that citizens can plan their retirement time efficiently by investing their funds in this secure market-based investment scheme.

The National Pension Scheme, also known as National Pension Plan, remains open to all the people working in the private sector, public sector or even from the unorganized business domain, except for people serving in the armed forces. Furthermore, in the National Pension Scheme, the investors must make a minimum investment of INR 6,000 every financial year, paid either lump sum or easy monthly instalments. 

Also, you must know that the subscriber contributions made to the National Pension Scheme generally get invested in the various market-linked financial instruments such as equity or debt, and the returns you earn usually depend on how well these market-linked investments perform. 

The prevailing NPS interest rate is 8-10%, and any Indian resident between 18 to 60 years can readily invest their funds by opening a National Pension Scheme account. Apart from that, the NPS scheme allows investors partial money withdrawals of up to 25% of the sum invested after three years of opening a national pension scheme. Moreover, computing this sum has become seamless with an NPS calculator that helps you get the exact withdrawal figure with just one click. 

NPS pension calculator lets a person calculate the temporary lump sum and pension sum an investor, under NPS (National Pension Scheme), can anticipate at retirement based on the sum they invest monthly. In addition, the National Pension Scheme calculator only displays the expected pension and does not ensure the precise figure. 

In simpler terms, a pension calculator refers to an online tool that assists investors in getting an accurate assessment of the capital accumulated, maturity sum of the whole investment, and monthly pension sum the investors will receive.

Furthermore, this sum is calculated based on the contribution towards the National Pension Scheme and investment duration. The capital earned is due to the power of compounding which makes the National Pension Scheme a lucrative retirement fund plan.  And the more a person invests their funds in a National Pension Scheme, the more the collected sum and the retirement advantage of the accumulated pension capital. 

Apart from that, the NPS (National Pension Scheme) calculator helps an investor calculate the sum invested and the final returns to accomplish the financial objectives. Any person eligible to invest funds in the National Pension Scheme can use the NPS pension calculator. Also, any investor who likes to invest their funds and get an accurate estimation of the NPS investment can use the NPS calculator. 

Using the 5Paisa Pension calculator is exceptionally seamless, and you can calculate your returns using the following steps: 

  • Choose the investment mode i.e. yearly or monthly
  • Once you choose the investment type, you need to enter the yearly or monthly sum
  • Before using the 5Paisa pension calculator, ensure that the present age of the investor should be more than 18 years and less than 60 years
  • The withdrawal percent you want on retirement from the National Pension Scheme account

Once you enter all these above details, the 5paisa Pension Calculator will calculate the following:

  • The total sum invested in the National Pension Scheme and investment term
  • The wealth accumulated
  • The monthly pension after retirement

Just like every other investment plan in India, the pension plan calculator also works on the compounding principle to get the perfect estimate of the returns. The formula to calculate NPS is as follows: 

A = P (1+ r/n) ^ nt

Here, 

“A” stands for the amount

“P” stands for Principal Sum

“r” stands for Rate of Interest

“t” stands for the total duration


Note: An investor must enter the yearly or monthly investment sum and the withdrawal % on retirement and current age (>= 18 years) for better calculation. 

While there are several advantages of using the 5paisa Pension calculator online, some of the prominent ones are as follows: 

  • The 5paisa Pension plan calculator is readily available for use on any mobile or web device. 
  • The monthly Pension calculator makes the complicated job of calculating the retirement wealth and other details of the National Pension Scheme effortless. 
  • 5paisa pension calculator online assists investors in overall financial planning by helping you with retirement estimates. Investors can then independently concentrate on their other economic purposes.
  • With the 5paisa pension calculator, you can access an automated tool that helps you estimate the NPS earnings based on different systems and evaluate the wealth created through National Pension Scheme investments. In addition, it assists investors in calculating the lump sum and assistance that can be acquired by the investor, given the 5paisa NPS calculator's power to perform scenario analysis.
  • The pension calculator online offers investors an alternative to assessing the NPS investment sum necessary to attain the expected retirement wealth.

The National Pension Scheme (NPS) does have a minimum contribution requirement. The amount varies for both NPS Tier-I and Tier-II accounts.  

 

Minimum contribution for National Pension Scheme Tier-I

At the time of registering for an NPS Tier-I account, an investor must commit to contributing a minimum of INR 500 to get started. A Tier-I account is a type of retirement savings account, where you can withdraw 60% of the corpus on maturity. The remaining 40% will be paid out in the form of a monthly pension. You can not prematurely withdraw money from this account before the age of 60 years.  

NPS Tier-I account additional facts:

  • The minimum amount per contribution: INR 500
  • The minimum amount that must be contributed per financial year for the account to stay active: INR 1000
  • Ensure that at least one minimum contribution is made every financial year until you turn 60 years


Minimum contribution for National Pension Scheme Tier-II

On the other hand, the minimum contribution required to open an NPS Tier-II account is INR 1,000. In this case, one can withdraw funds before the age of 60 years. It takes about working three days to hit one's account. However, to optimize the opportunity, try not to make premature withdrawals, and build a consistent saving habit. On maturity, you can withdraw the full corpus, or make multiple withdrawals, as per your needs.  

NPS Tier-II account additional facts:

  • The minimum amount per contribution: INR 250
  • There is no requirement to contribute every year

For the NPS Tier-II account, contribution rules are relaxed and one does not need to contribute each year. However, it is advisable to build a saving habit, make some contributions and make the most of your NPS account. 

FAQ’s

The National Pension System (NPS) is a voluntary pension scheme open to all Indian citizens and regulated by the Pension Fund Regulatory Authority of India (PFRDA). Citizens between the ages of 18 to 60 can open an account and make contributions. The fund matures at age 60, but account holders can get an extension up to age 70. 
 

The scheme invests the fund contributions into diverse market-linked instruments, ranging from equity to debt, and the returns depend on how the investments perform. Hence, it does not offer a fixed rate of interest. 

The four main asset classes include equities or stocks, corporate bonds, Central and State Government Bonds, and assets like Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InVITs).

You have the option of picking your asset allocation (known as an active choice) or your NPS fund manager will pick (this is known as an auto choice). Choose wisely, based on your knowledge of investments. 

Under Active Choice, an account holder picks the split between the four asset classes. However, allocation to equities cannot exceed 75% up to age 50. After crossing age 50, it gradually reduces to about 50%, to mitigate risks. 

NPS has two account types: 

Tier I Account

This account comes with a tax deduction benefit under Section 80C of the Income Tax Act, of up to Rs 1.5 lakh per annum and INR 50,000 per annum under Section 80CCD (1B). 

You cannot withdraw from this account until maturity at age 60. At this time, 60% of the corpus can be withdrawn, tax-free. The 40% annuity which is paid out as a monthly pension will be taxed.

Tier II Account

Only by opening a Tier-1 account can you open a Tier-2 account, which is not compulsory. You can withdraw funds at any time. Since the financial year 2020-2021, a tax deduction can be claimed, however, with a lock-in period of three years. 

The eight fund managers include: HDFC Pension Management Co. Ltd, Birla Sun Life Pension Fund Ltd, ICICI Prudential Pension Fund Management Ltd, Kotak Mahindra Pension Funds Ltd, LIC Pension Fund Ltd, Reliance Capital Pension Fund Ltd, SBI Pension Fund Pvt. Ltd, and UTI Retirement Solutions Ltd
 

NPS' Tier-1 is a market-linked pension scheme, which brings a wealth creation opportunity to retirement planning. One can invest up to the age of 60, which is considered to be the official retirement age. There is a scope for premature withdrawals only after 10 years, but it is advisable to stay invested until maturity. 
NPS' Tier-2 scheme is a flexible account, which enables easy withdrawals at any given time. However, it is not designed to be a wealth creation account. 
Investors can invest a minimum of INR 1000 per year into Tier-1, and a minimum of INR 250 into Tier 2 to keep them active. There is no cap on the maximum limit. 
One can get a tax deduction under 80C of the Income Tax Act of up to INR 2,00,000 in a year by investing in Tier-1. If you have already invested up to INR 1,50,000, you can get an extra deduction of INR 50,000 exclusively by investing in NPS. 

This is a useful tool that can help you calculate the wealth creation opportunity via NPS. You can get an estimate of the maturity amount, and monthly pension potential, and plan your monthly or annual contributions accordingly. You can decide how much you will also withdraw as a lump sum on maturity, and how much annuity to keep that will go into the monthly pension.

You will need to input specific details as follows: 

Choose the investment frequency - monthly or annual 
Enter the amount you will contribute at that frequency 
Choose your current age 
Choose the percentage you will withdraw as lumpsum on maturity 

The calculator will now indicate the total amount invested during the investment period, maturity amount, how much you will withdraw as lumpsum, and the monthly pension income. 

Equipped with this information, you can better plan contributions and also decide to raise the amount, or change frequency to get the best outcomes. 

Yes, you can withdraw prematurely based on certain conditions. You must be invested for at least three years. A maximum of three premature withdrawals are allowed, with a gap of five years between them. The withdrawn amount cannot exceed 25% of the overall contribution.

Withdrawals can be made only due to the following conditions: Children's marriage, children's higher education; treatment needs for a critical illness of one's self, marital partner, dependent parents, and children; purchase of residential house only when the account holder does not already own residential property.