Here is how you can get monthly pension of Rs 1.5 Lakh
NPS Calculator: The National Pension Scheme, which is a government-backed scheme, aims to provide social security to Indian citizens after retirement. The plan allows people to make monthly contributions to save for life after retirement. It was launched in January 2004 for government employees. Later, in 2009, it was opened to all sections. It offers an attractive long-term savings opportunity to effectively plan for your retirement through safe and regulated market-based returns.
Who can open an NPS account?
A new pension plan account can be opened by:
– An Indian citizen, whether resident or non-resident
– The candidate must be between the ages of 18 and 70 on the date of submission of his application and
– The applicant must comply with the KYC standards prescribed by the program
NPS Account Types
Under the NPS, there are two types of accounts – Tier 1 and Tier 2. The Tier 1 account is primarily for retirement savings where one has to make a minimum contribution of Rs 500 when opening the account . It also carries 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 their entire corpus at any time. No tax benefits are available in this account.
How can you get a pension of Rs 1,50,000 per month?
If a person joins the NPS at the age of 20 and starts contributing Rs 6,000 per month until the age of 65. The total contribution will be Rs 37.8 lakh. Considering the expected annual return of 10%, the total investment will reach Rs 7.39 crore. Now, if the NPS subscriber converts 40% of the corpus into an annuity, the value will be Rs 2.95 crore. Assuming an annuity rate of 10%, the monthly pension can be Rs 1.47 lakh. Not only that, the NPS subscriber will get a lump sum of around Rs 4.44 crore.
What is the level of risk associated with NPS?
Recently, the PFRDA made it mandatory for fund managers to assign ratings based on the level of NPS risk. The new rules impose six levels of risk: low risk, low to moderate risk, moderate risk, moderately high risk, high risk and very high risk. Based on plan characteristics, pension funds assign risk levels to plans 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 rating system will help underwriters get a better idea of the risk associated with their investments under the NPS. They will be able to make a better decision on the allocation of investments to different asset class schemes at the time of joining the scheme and at the time of subsequent contributions to the schemes.
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