The National Pension System is a voluntary, long-term retirement savings plan managed by the Pension Fund Regulatory and Development Authority (PFRDA). It’s open to both public and private sector employees aged 18 to 70. People contribute regularly to build a retirement fund, and when it matures, they can take out part as a lump sum and use the rest for monthly pension payments.
NPS, One of the Finest Retirement Plan
So, it’s a great plan for anyone thinking about retirement. Starting with NPS when you’re young ensures you’ll get the most monthly pension once you’re 60. If you’re considering opening an NPS account, it’s important to learn about its benefits and how you can receive up to Rs 2 lakh per month as a pension after you retire.
Major Benefits of NPS or National Pension Scheme
Compared to other retirement plans, the NPS is known for giving better returns. It has provided investors with an annualized return of approximately 9 to 12 percent.
Investors have a lot of flexibility with NPS. They can start investing anytime, change their investment amount, choose how to invest, and manage their accounts from anywhere.
Employees who contribute to NPS can claim a tax deduction of up to 2 lakh per year under Sections 80CCD(1), 80CCD(2), and 80CCD(1B).
Also read:5 Different Ways to Save Income Tax in India
How to Earn ₹1 Lakh Monthly Pension With NPS or National Pension Scheme?
Let’s see how you can earn a Rs 1 lakh pension through National Pension Scheme investments with an example. If you start contributing to the NPS at age 40, you’ll invest for 20 years until you reach the retirement age of 60.
To receive a monthly pension of Rs 1 lakh, you need to invest Rs 66,000 every month for 20 years. This totals to an investment of 1.58 crore. Assuming a 10 percent return, your gains would be Rs 3.46 crore. So, your total corpus fund after 20 years would be Rs 5.05 crore.
When your NPS account matures, if you take out 60 percent as a lump sum, you’ll get Rs 3.03 crore. The remaining 40 percent, which is Rs 2.02 crore, can be used for the annuity option. Assuming a 6 percent annuity rate, you’ll receive a monthly pension of Rs 1.01 lakh.