NPS Calculator
Investment per month
Your age (Years)
Expected return (P.A)
NPS Calculator: Calculate National Pension Scheme Returns Online
The National Pension Scheme is one of the best solutions for people to prepare for their retirement financially. To better understand the receivable pension amount and amount of initial investment, you must use an NPS calculator. Such a pension calculator can determine whether this scheme is worth joining or not.
This article will discuss details about an NPS calculator, how this pension is calculated, and how an NPS calculator works, among other questions.
What is an NPS calculator?
An NPS calculator allows a potential investor in the National Pension Scheme to determine:
- Provisional lump sum
- Pension amount per month
- Annuity
- Expected ROI
However, note that an NPS calculator shows you an approximate amount and not an exact figure.
Factors to understand for NPS Pension Calculator
Before giving you the exact formula that the NPS uses, these terms will help clarify what that formula explains.
Date of birth
You will need to enter your date of birth to calculate the number of years available to contribute. For example, if your date of birth is 28th February 1994, you have approximately 33 years until you reach 60 and contribute.
Expected return on investment
Expected return on investment is the percentage of returns you wish to earn. The investment in annuities will be done based on the percentage you desire to make.
% of the annuity to purchase
Once your corpus matures at 60 years of age, a fraction of the sum will be reinvested to provide you with a monthly annuity. You can reinvest a percentage less than 40%. However, in case you choose to exit the scheme, you have to reinvest 80% in annuities.
Investment sum
Investment sum refers to the monthly contribution that you intend to make.
Expected annuity rate
The expected annuity rate is the percentage you expect to earn monthly.
Based on these terms, we can explain how this pension is calculated.
How is Pension Calculated?
The NPS calculator uses the compound interest to calculate the pension amount. Moreover, the compound interest is the most common formula worldwide for pension calculation.
How does the NPS Calculator work?
As mentioned above, the NPS calculator works based on compound interest. The formula used by National Pension Scheme is given below:
A=P(1+r/n)nt
As the traditional calculation in compound interest goes, a principal is multiplied by the overall rate divided by time.
The exact terms denoted by these letters in the formula are shown in the table below.
|
Letter |
Meaning |
|
A |
Amount on maturation |
|
P |
Principal sum |
|
r |
Expected rate of interest per annum |
|
t |
Total tenure |
Example: National Pension Scheme Calculator
An example of the inputs for an NPS calculator is as shown below:
|
Inputs |
Values (You can change these as per your requirement) |
|
Date of birth |
28/02/1994 (27 years as of 2021) |
|
Monthly contribution amount |
₹3000 |
|
Total years of contribution |
33 years (up to 60 years) |
|
Expectation of ROI |
14% |
|
I would like to purchase an annuity for % of the total investment |
40% |
|
Your expectation of annuity rate |
6% |
Output for the NPS Return Calculator
|
Outputs |
Values for the Above Inputs |
|
Total investment |
₹11,88,000 |
|
Total corpus |
₹2,54,46,089 |
|
Lump sum value (taxable) |
₹1,52,67,653 |
|
Annuity value |
₹1,01,78,436 |
|
Expected monthly pension |
₹50,892 |
How to Calculate Pension?
The NPS calculator will help you calculate the monthly amount you will receive after retirement. The pension can be calculated with the compound interest formula.
Advantages of using NPS Calculator
There are plenty of NPS calculator benefits. Some of them are:
- No mistakes while trying to work out how much you will get every month after retirement
- Additionally, it helps you undertake long-term financial planning
- You will be able to assess the approximate earnings per month
- You have a clear idea of the amount of investment you need to make
With so many pension calculator benefits, use it today to calculate your pension!
In conclusion, an NPS calculator is a valuable tool for understanding the amount you should invest into the NPS and expected returns. Also, for a pension planner, the tool is very useful as it gives precise numbers, albeit tentative, which makes the process very worthwhile.
