NPS Benefit: The Pension Fund Regulatory and Development Authority (PFRDA) has recently made a major change to the rules related to the National Pension System (NPS) for private sector employees. Under the new rules, non-government employees can now withdraw up to 80 percent of their total NPS corpus at the time of retirement, while the remaining 20 percent must be used to compulsorily purchase an annuity, which will provide a pension going forward. Earlier, this ratio was 60 percent lump sum and 40 percent annuity.
After the rule change, the lump sum amount received at retirement will increase, but the amount of the monthly pension may be slightly less than before. To better understand this change, let’s take the example of a monthly investment of ₹5,000.
Read Here: Google Pixel 9a now for just ₹29,000 with a big discount. See out how to take use of this offer
How much return will you get?
Let’s assume a private sector employee invests ₹5,000 every month in NPS. This would be an annual investment of ₹60,000. Let’s assume an average annual return of 10 percent and a retirement age of 60 years. Let’s also assume an average annual return of 6 percent on the annuity. Based on these conditions, the calculation is as follows:
How much return will you get on 30 30-year investment?
If a person starts investing in NPS from the age of 30, their investment period will be 30 years. During this period, the total investment will be approximately ₹18 lakh. With an average return of 10 percent, their total corpus by the age of 60 could be approximately ₹1.15 crore. According to the new rules, they can withdraw 80 percent of this amount, i.e., approximately ₹92 lakh, as a lump sum at retirement. The remaining approximately ₹23 lakh, which is 20 percent of the total corpus, will be used to purchase an annuity. In this case, if an average annual return of 6 percent is assumed on an annuity of Rs 23 lakh, the person can receive a pension of approximately Rs 11,000 to Rs 12,000 per month after retirement.
Read Here: Brilliant bowling by Shardul Thakur, fantastic performance by Mumbai without Rohit
How much return will you get on a 40-year investment?
However, if a person starts investing Rs 5,000 per month at the age of 40, their investment period will be 20 years. In this situation, the total investment will be approximately Rs 12 lakh. With an average return, the total corpus can reach around Rs 48 to 50 lakh by the age of 60. Of this, they can withdraw about Rs 38 to 40 lakh as a lump sum, while Rs 9 to 10 lakh will have to be used to purchase an annuity. This annuity can provide them with a pension of approximately Rs 4,500 to Rs 5,000 per month.