Pension Scheme/National Pension System: Anurag is about to turn 40, but he has not planned anything for his retirement yet. While he has spent 15 years working. But today when he sees others planning for pension from a young age, his tension is increasing. It is also justified to be tense, because now he understands that in non-working years, if there is no good amount in hand or no source of income, then how will the necessary expenses be met. At the same time, when the inflation rate comes into mind, he feels that at retirement a good fund (at least Rs 1 crore) along with a monthly income of at least Rs 1 lakh is necessary. When he took advice from the advisor, he came to know about the government pension scheme National Pension System (NPS).
NPS: Government’s retirement scheme
National Pension System is a retirement scheme in which if you plan to invest as soon as you get a job, then your old age will be spent comfortably. Any Indian citizen (government employee or private sector employee) between the age of 18 and 70 years can open an account in the National Pension System. NRIs are also eligible for this. After opening the account, one has to contribute till the age of 60 or till maturity. At least 20 years of investment is necessary in this. If you look at the return history of NPS, till now it has given 8% to 12% annual return.
After opening the account, you have to contribute till the age of 60 or till maturity. The responsibility of investing the amount deposited in NPS is given to pension fund managers registered by PFRDA. They invest your investment in equity, government securities and non-government securities as well as fixed income instruments.
NPS: Calculation for pension of Rs 1 lakh
Age to start investing: 40 years
Investment in NPS every month: Rs 25,000
Investment period: 25 years (till age 65)
Your total investment: Rs 60,00,000
Estimated return on investment: 10% p.a.
Total Corpus: Rs 2,67,57,807 (Rs 2.68 crore)
Total profit: Rs 2,07,57,807 (Rs 2.08 crore)
Investment of pension wealth in annuity plans: 55 per cent
Annuity Rate: 8%
Pension Wealth: Rs 1,47,16,794 (Rs 1.47 crore)
Lump Sum Value: Rs 1,20,41,013 (Rs 1.20 crore)
Monthly Pension: Rs 99000 (about Rs 1 lakh)
(Note: In NPS scheme, it is mandatory to buy annuity of at least 40% of the amount. You can increase the annuity amount for higher pension.)
Withdrawal rules after retirement
Currently, one can withdraw up to 60 per cent of the total corpus as a lump sum, with the remaining 40 per cent going into an annuity plan. Under the new NPS guidelines, if the total corpus is Rs 5 lakh or less, subscribers can withdraw the entire amount without buying an annuity plan. These withdrawals are also tax-free.