NPS: The National Pension System (NPS) is a voluntary, long-term investment initiative designed for retirement, regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and the Central Government. Individuals can enroll in this pension scheme starting at the age of 18.

Start investment at the age of 24

For instance, if you begin your career at 23 or 24, you may achieve job stability by the age of 25, allowing you to consider investing small amounts. A notable advantage of the NPS is that it accommodates any initial investment amount, offering a Systematic Investment Plan (SIP) top-up feature. This enables you to increase your investment by a predetermined percentage each year. Thus, as your income grows, you can enhance your contributions to the National Pension Scheme through the NPS Top-Up.

SIP like features

If you enroll in the NPS at 25 and invest Rs 3,500 monthly, with an annual top-up of 5%, you could accumulate a retirement corpus of approximately Rs 1.50 crore. Additionally, this plan can facilitate a monthly pension of Rs 1 lakh.

Contributions up to Rs 1.5 lakh for Tier I investments qualify for tax deductions under section 80CCD (1) as per section 80C. Furthermore, subscribers can claim an additional deduction of up to Rs 50,000 for Tier I contributions under section 80CCD (1B). Contributions made by employers towards Tier I investments are also eligible for deductions under section 80CCD (2), with a limit of 14% for central government contributions and 10% for other employers. This deduction is in addition to the limits set under section 80C.

See the calculation

Monthly investment in NPS: Rs 3,500

Annual top-up investment: 5%

Total investment over 35 years: Rs 37,93,453

Projected annual return: 12%

Final corpus: Rs 3,09,23,608 (approximately Rs 3 crore)

Total benefit accrued: Rs 2,71,30,155 (around Rs 2.71 crore)

Investment in annuity plan: 50%

Annuity interest rate: 8%

Pension wealth accumulated: Rs 1,54,61,804 (approximately Rs 1.55 crore)

Lump sum withdrawal amount: Rs 1,54,61,804 (around Rs 1.55 crore)

Monthly pension disbursement: Rs 1,03,079 (approximately Rs 1 lakh)