NPS Calculator

NPS Calculator is a free online tool, that allows you to estimate the expected maturity corpus for your contributions made in the National Pension System(NPS). The calculator uses some key inputs from the user such as the monthly investment amount, age at the time of initial contribution and period of contribution i.e. the age at which the account will be closed.

The NPS calculator essentially combines the features of 2 calculators – a SIP calculator and an annuity calculator into a single tool. The SIP calculator calculates the returns and final maturity value of your monthly NPS contributions. While the annuity calculator built into the NPS calculator calculates the monthly pension you can receive after superannuation of the account based your NPS contributions and annuities purchased from the corpus created at maturity.

The NPS calculator needs to be provided a few key inputs in order to estimate the NPS corpus at superannuation as well as the other details such as monthly pension amount. Below are the steps for using the calculator:

Step 1 - Provide the monthly investment you are planning to make into the National Pension System account.

Step 2 – In the next field you need to provide the expected rate of return from your investment in NPS. Typically, equity-oriented investments in NPS give higher long-term returns as compared to debt-oriented investments.

Step 3 - Another crucial factor that is considered in the National Pension Scheme calculation is age at the time of starting your investment and the age till which you plan to continue making these investments. For example, if your present age is 25 years and you plan to close the account at the time of retirement at 69 years, then the years of contribution would be 35 years (60 – 25).

Based on the information provided in the above-mentioned steps, the NPS Calculator evaluates the total amount invested, the total returns received from the investment and the total maturity value.

Step 4 - Next you need to provide the details of how much of the accumulated NPS corpus at the time of retirement will be used to purchase annuities and the expected rate of return from the annuities. Currently the minimum amount for which annuities will be purchased is 40% of the accumulated corpus at the time of superannuation/closure of account at retirement.

Step 5 – Based on the information provided in the previous step, the NPS calculator immediately displays the amount that can be withdrawn as a lump-sum at retirement and the monthly pension that the investor can expect to receive from the investment.

NPS Calculator uses the formula for compound interest to compute the retirement amount. The formula for the NPS Calculator is:

A = P (1 + r/n) ^ (nt)

Where:

To calculate the approximate future value of your NPS investments, the following information needs to be fed into the NPS calculator:

The NPS Calculator is an online tool that is designed to assist individuals in planning and managing their retirement savings plan, efficiently. The calculator can be used by all Indian citizens, who are above 18 years old but not more than 60 years, are eligible to invest in the National Pension Scheme, as per the NPS rules. Following are the group of individuals who can use the NPS Calculator:

● Private Sector Employees

● Government Employees

● Self-employed

● Individuals Approaching Retirement

There are multiple ways via which NPS calculator may help you. These are explained below:

The below-mentioned is the formula for calculating the pension amount w.r.t. one's NPS investments:

A = P(1+r/n)^nt

Where,

A= The pension amount

P= Principal sum invested

r=Rate of interest (annual)

n= Number of times the interest is compounding

t= Total time period

To understand it better, let’s take a look at the following example:

Mr Z is 30 years old and has started contributing a sum of Rs 5,000 monthly towards his NPS account. He plans to do this till the age of 60, i.e. total tenure is 30 years. Let's assume the rate of interest to be 8%. Annuity for 40% of total corpus with an expected rate of return on annuity to be 6%.

As per the pension calculation formula, he should get the following sum of pension at the end of 30 years:

P = Rs 5,000 x 12 x 30 = Rs 18 lakhs

Basis the prior-mentioned pension formula, you should expect monthly pension to be equivalent to Rs 22,560, annuity to be Rs 35.02 lakhs and corpus of Rs 52.52 lakhs in total.

Following are some of the benefits of the NPS Calculator:

● It is an easy online tool that helps you calculate the estimated retirement maturity value and pension amount you will obtain in the future.

● The NPS Calculator is an easy-to-access online tool that can used through any internet-enabled mobile device or laptop.

● The calculator provides an accurate estimation that helps you make an informed decision about your contributions towards NPS.

● NPS offers tax benefits under Section 80CCD (1) of the Income Tax Act, 1961. Through the NPS Calculator, you can also evaluate the tax amount you would save on NPS investments.

The National Pension System (NPS) Calculator assists you in evaluating your monthly pension amount and retirement savings plan. The NPS Calculator is an easy-to-use and accessible tool that simplifies retirement planning. So, start your NPS investment now and grow your retirement savings.