The National Pension System (NPS) is a retirement saving scheme started by the Government of India. Any citizen above 18 years can invest in it. In this scheme, a person can build a big fund by investing a small amount every month.
For example, if you invest ₹5,000 every month at the age of 25, then how much money can you collect by the age of 60? Let’s understand. Suppose a person starts a job at 25 and invests ₹5,000 per month in the NPS Tier-1 account. He continues this investment for 35 years, till the age of 60.
How Much Money Will You Get on Retirement?
If you invest ₹5,000 per month for 35 years, your total investment will be:
5,000 × 12 × 35 = ₹21 lakh (approx.)
With compound interest and 10% annual return, this amount will grow to ₹1.72 crore (approx.). This means by saving only ₹5,000 every month, a person can become a crorepati by the age of 60.
How Much Lump Sum and How Much Pension?
As per NPS rules, 40% of the fund must go into annuity, and 60% can be withdrawn in lump sum.
Annuity amount = ₹68.63 lakh (approx.)
Lump sum withdrawal = ₹1.03 crore (approx.)
Monthly Pension from Annuity
If annuity gives an average annual return of 6%:
Annual pension = 68.63 lakh × 6% = ₹4.12 lakh
Monthly pension = 4.12 lakh ÷ 12 = ₹34,315 (approx.)
So, the investor will get a lifetime pension of about ₹34,315 every month.