We all plan to save on retirement. Our future plans are more versatile and important than the present and so to accomplish that we look out for various government schemes every now and then to save pennies.
With that in mind, the government has introduced the National Pension System (NPS) governed by the government. Indian citizens aged between 18-65 years can join the NPS as an individual or as employee-employer groups after presenting the required information and Know Your Customer (KYC) documentation. The accumulation of wealth under NPS depends on factors such as the amount of investment, the term of investment and income generated in the invested amount. PFRDA-approved Pension Funds manage NPS investment. These have been established up as per the investment guidelines of the PFRDA.
Coming to talk about the fullest benefits of the NPS, the subscriber should start investing as early as possible. One can calculate the expected returns on the investment online on the NPS calculator of National Pension System Trust.
Now, 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 a lump sum.
Note: This is an example, based on an assumed rate of return of 10% and an annuity rate of 6%.
The final pension and lump sum amount you will get from NPS may be more high-priced. Also, you can increase your monthly contribution towards NPS to make your retirement corpus bigger.
NPS: 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, the 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 the Tier II account whenever they wish.