The National Pension System (NPS) is a long-term savings tool for retirement. However, NPS also offers a prosperity planner to help in financial planning. For instance, people may need help determining how long they would live and ascertain the corpus that can outlive them.

Generally, people save for retirement after whatever is left from their regular expenses. It could be a problem in retirement planning, as with age, they will have less time to save for old age.

Regular savings and investments are crucial for retirement. Individuals can work out a tentative corpus required for retirement based on their lifestyles and expenses and save and invest in appropriate financial tools.

NPS provides the National Prosperity Planner (NPP) where one can check the tentative pension after retirement based on the contributions. It can tell you the gaps and the amount required.

Let us learn more about the National Prosperity Planner.

NPS Prosperity Planner (NPP): 

The NPP calculator can calculate the expected pension amount after retirement based on the individual’s historical data against the permanent retirement account number (PRAN).

It considers inflation before reaching a number. NPP also provides information regarding investments required to build an appropriate corpus and can estimate the monthly annuity. If there is a shortfall, it will suggest increasing the contributions before retirement.

What NPP Can Tell You?

• Pension you would receive after retirement based on your current contributions.
• It will consider inflation and the required corpus.
• Suggest additional investments to make up for the shortfall.

For example, if a 30-year-old has invested Rs 5 lakh in NPS since 2021, how much pension would the person receive at retirement with an expected monthly expense of Rs 50,000? Or what is the gap, and how much additional investment will be required to fill the shortfall?

Here’s the process:

• Visit https://npp.proteantech.in/.
• Click on Next and then select the category as individual.
• Provide the date of birth and joining NPS; the retirement date will automatically show.
• Provide a tentative NPS balance; the next box on the screen will show the average annual contribution at a 9.1 per cent compounded annual growth rate (CAGR), or Rs 1,39,670.
• The next screen will show the monthly pension one would receive after 60 if the individual continues to contribute the same amount every year until retirement.

So, if the person continues to contribute Rs 1,39,670 till retirement, the monthly pension will be Rs 47,925. As per the NPP calculator, the projected contribution will be Rs 0.46 crore, and the NPS corpus will be Rs 2.21 crore for the given example.

• On the next page, the person must mention the current monthly expenses, and it will show the monthly pension one would need after retirement.

In our example, the monthly expenditure is Rs 50,000, and thus, the monthly pension required as per the calculator is Rs 2,87,175 to maintain the same lifestyle. In contrast, the current contributions would deliver only Rs 47,925 per month. Evidently, the individual needs to ramp-up the investments.

• Click on the ‘How do I address the gap? If annuity portion is kept at 40 per cent, one would need a corpus of Rs 15.66 crore to meet the monthly pension of Rs 2,87,175.

For the given example, the current contributions must increase from Rs 1,39,670 to Rs 12,39,190 yearly.

The prosperity planner is an easy tool to get a clear idea of how much to save for retirement, considering inflation. It will help NPS subscribers determine the expected contributions to meet any shortfall, if any, to achieve the desired retirement corpus.