National Pension System for retirement: Planning to save for retirement? You can try government-backed National Pension System (NPS). Any citizen of India aged between 18-65 years can join the NPS as an individual or as employee-employer groups after submitting required information and Know Your Customer (KYC) documentation. The accumulation of wealth under NPS depends on factors like the amount of investment, the term of investment and income generated in the invested amount. NPS investment is managed by PFRDA-approved Pension Funds. These have been set up as per the investment guidelines of the PFRDA.
To make the most of the NPS, the subscriber should start investing as early as possible. You can calculate the expected returns on your investment online on the NPS calculator of National Pension System Trust. Take a look at how the investment of Rs 5000 per month will grow if someone starts at the age of 30:
The online calculator shows that by investing Rs 5000 per month, a 30-year-old subscriber can get up to Rs 22,279 monthly pension and Rs 45.5 lakh as a lump sum.
The investment of Rs 10,000 per month from the age of 30 may fetch Rs 45587 per month pension and Rs 91.1 lakh as lump sum.
Note: These numbers are indicative, based on an assumed rate of return of 10 per cent and an annuity rate of 6 per cent.
The final pension and lump sum amount you will get from NPS may be higher. Also, you can increase your monthly contribution towards NPS to make your retirement corpus bigger.
Tax benefit: With NPS, you can take tax benefit of Rs 50,000 in addition to the Rs 1.5 lakh you enjoy under Section 80C of Income Tax Act.
There are two types of accounts under NPS – Tier I & II are provided. The Tier I account is mandatory, the subscriber gets the option to opt for Tier II account opening and operation. While Tier I is a restricted and conditional withdrawable retirement
account, Tier-II account is a voluntary savings facility available as an add-on to any Tier-1 account holder. Subscribers are free to withdraw their savings from Tier II account whenever they wish.