NPS Calculator: UPS was introduced by the central government. Government employees are now given the opportunity to choose this scheme as a new option. The Old Pension Scheme was discontinued in 2004 and replaced by the New Pension Scheme. Government employees will now have to choose between UPS and NPS. While this isn’t required for those working in the private sector, NPS offers a strong option for ensuring a comfortable pension after retirement.
Learn What NPS Is
NPS is a platform where you can start investing now for your post-retirement life. This scheme is administered by the Public Sector Undertakings (PFRDA). The money you deposit can be invested in the stock market, government securities, and corporate bonds, meaning the return on your investment will depend on market performance, your age, and the amount of your investment. The objective of NPS is to ensure financial security after retirement.
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NPS is a unique option in the private sector
NPS is a beneficial option for private sector employees in many ways. First, the age limit for entry into this scheme ranges from 18 to 70 years, meaning many young and middle-aged employees can start now. Their investments can yield compounding benefits over time. Tax benefits are also available, allowing today’s investment to translate into a substantial pension in the future. For example, if a person starts at age 35 and invests regularly, a monthly pension of approximately ₹100,000 at retirement is achievable.
How much investment is required?
Suppose you start at age 35 and continue investing until age 60. According to experts’ calculations, if annual investment growth is 10%, two scenarios arise: In one, if you use 80% of your total funds for annuity, the monthly contribution will be approximately ₹17,000. In the other, if you use 40% of your funds first and withdraw the remaining funds for annuity, the monthly contribution will be approximately ₹34,000. In both scenarios, a monthly pension of approximately ₹1 lakh per month after retirement is possible.
What are the benefits of investing?
In addition to the benefits of regular investment in NPS as you age, the following are important: You can transfer your NPS account wherever you work. This scheme has low management fees and offers the benefit of compound interest. Furthermore, investing in NPS also provides an exemption under Section 80CCD of the Income Tax Act.
Learn about the tax benefits
Investing in NPS is not only a way to save for a pension, but also a tax-saving method. Generally, deductions of up to ₹1.5 lakh are available, and an additional deduction of up to ₹50,000 can be availed under Section 80CCD. Thus, investing can be a powerful tool to secure a future pension by saving today’s earnings.