The National Pension System (NPS) is one of the most secure investment instruments for individuals looking to earn returns without worrying too much about risks. Although NPS offers relatively lower returns than other available investment instruments in the market, it is preferred by most as an effective retirement planning tool, considering its medium-risk profile.

Under the NPS scheme, you can choose among eight Pension Fund Managers. NPS includes four asset classes: equity, corporate bonds, government bonds, and alternate assets. Here, you are required to determine the allocation of the investment you wish to make towards each of the asset classes.

As of April 30, 2024, the average NPS returns Tier 1 (equity) delivered around 31.52 per cent to 38.53 per cent returns in one year. Government bond funds (G) recorded 10.6 per cent returns, while corporate bond funds (C) gave 8.6 per cent returns over this period.

Also Read: What Is Indian Succession Act And How Does It Apply In Estate Planning?

Use NPS calculator to know your returns

The expected rate of return on NPS investment can be high, depending on the investment period. To know your expected returns, you can use the NPS calculator to estimate the returns you will likely earn over a period on an NPS investment.

Through the NPS calculator, you can:

– Assess the amount you are likely to earn when the NPS corpus is realised at the time of retirement, i.e. at the age of 60 years.

– Estimate how much you are required to save periodically to avail high returns

How to use the NPS calculator?

With your NPS login details, sign into the account portal anytime and check your investment status.

To use the NPS calculator, you need to enter the following data:

1. Your date of birth

2. Estimated amount that you are willing to invest every month

3. Returns that are expected through the NPS investment

4. Your expected annuity rate

As per the existing regulations regarding NPS, investors cannot withdraw the entire amount at the time of maturity. Instead, they must purchase annuities, which amount to at least 40 per cent of the accumulated corpus, while the remaining 60 per cent can be withdrawn. The expected annuity rate is another detail that must be entered into the NPS calculator to correctly estimate returns through NPS.

Also Read: NPS Grievance: How Can You Escalate Your Concerns To Higher Authorities?

Once the NPS calculator has received the above-mentioned details, it can calculate the following results:

– Total amount you have invested into your NPS Account

– Total corpus that is generated upon your retirement, based on the expected rate of interest

– Total amount that will be purchased as annuities at the time of maturity

– The total amount that can be withdrawn as a lump sum at the time of maturity

– Based on the annuity purchase, the estimated pension you will receive monthly

In recent years, NPS has become an investment instrument of choice for investors who want to create a secure retirement corpus. Although NPS allows you to invest across a range of assets, depending on the age factor, there is a cap on exposure to equities.