NPS Scheme For Post-Retirement Savings: Financial security is a major concern for those retiring. For post-retirement income, people plan and manage their savings for years. There are various instruments available in the market that assures post-retirement income. One such scheme is National Pension System, which is a government scheme where individuals can contribute a monthly amount to withdraw regular income after retirement.
What is National Pension System?
NPS is a government-sponsored pension scheme, which was launched in January 2004 for government employees. Later, in 2009, it was opened to all sections. The NPS is a pension-cum-investment scheme launched by the Government of India to provide old-age security to citizens of India. It brings an attractive long-term saving avenue to effectively plan your retirement through safe and regulated market-based returns.
NPS Scheme: How to Get Rs 20,000 Pension
If a person joins the NPS at the age of 20 and starts contributing Rs 1,000 a month, the total contribution will be Rs 5.4 lakh till the time of retirement. Given the expected 10 per cent return annually, the total investment will grow into Rs 1.05 crore. Now, if the NPS subscriber converts 40 per cent of the corpus into an annuity, the value will be Rs 42.28 lakh. Assuming the annuity rate of 10 per cent, the monthly pension can be Rs 21,140. Not only this, the NPS subscriber will get a lumpsum amount of about Rs 63.41 lakh.
As the monthly contribution amount goes up, the post-retirement income will also increase. For instance, if the person increases his/ her contribution amount to Rs 2,500, the pension will be about Rs 52,000 per month after the age of 65 years.
NPS Calculator: How to Use It
– To use the NPS calculator, first go to the link: https://www.npstrust.org.in/content/pension-calculator
– Next, enter your date of birth
– Now, enter your amount of monthly contributions and the age till which you would like to contribute
– Enter your expected return on investment and annuity return
After all this is done, you will be able to view your monthly pension, annuity value and lump sum value at the right side of your computer scheme
Who Can Join NPS?
To join the NPS, one has to fulfil eligibility conditions: A citizen of India, whether resident or non-resident; applicant should be between 18 to 70 years of age as on the date of submission of his/her application; and the applicant should comply with KYC norms prescribed by the scheme.
The Risk Rating System
The Pension Fund Regulatory and Development Authority of India (PFRDA) rules have outlined six levels of risk to various schemes under the NPS — Low Risk, Low to Moderate Risk, Moderate Risk, Moderately High Risk, High Risk, and Very High Risk. Fund managers need to tell the subscribers how much risk is involved in the scheme they are planning to invest in.
“Schemes of the National Pension System (NPS) are becoming an important asset for investment for long-term saving of the individuals and help in creating a desired corpus for pension, if invested in an informed manner. The investment under various asset classes of the Schemes of Pension Funds would involve different level of risks for subscribers and, therefore, it is desired that the adequate disclosure of the risks involved in various schemes of NPS are made available for awareness of the subscribers,” the PFRDA has said in the circular.