Understanding the National Pension System (NPS)
Our NPS Calculator helps you estimate your retirement corpus and monthly pension from your NPS investments.
What is NPS?
The National Pension System (NPS) is a voluntary retirement savings scheme launched by the Government of India to enable subscribers to make defined contributions towards planned savings for their retirement. It aims to provide old age income security to citizens.
NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
How NPS Works
NPS operates on a defined contribution basis, where individuals contribute regularly during their working life. A portion of the corpus can be withdrawn at maturity, and the remaining must be used to purchase an annuity for regular pension income.
Key aspects of NPS:
-
Investment PhaseContributions are invested in a mix of equities, corporate bonds, and government securities based on the subscriber's choice.
-
MaturityAt the age of 60, subscribers can withdraw up to 60% of the corpus as a lump sum (tax-free). The remaining 40% must be used to buy an annuity.
-
AnnuityThe annuity provides a regular pension payment for the rest of the subscriber's life. The pension amount depends on the annuity rate.
NPS Calculation Logic
Our calculator estimates your future NPS corpus based on your monthly contributions, expected return rate, and the number of years until retirement (assumed at 60). It then calculates the lump sum withdrawal and the monthly pension based on the annuity purchase percentage and expected annuity rate.
The calculation uses the future value of a series of payments (annuity future value) formula for the corpus accumulation and a simple interest calculation for the monthly pension from the annuity.