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NPS Investments: Here’s How To Earn Rs 1 Lakh Monthly Pension

Given the superior returns NPS provides, more and more people, including corporate and government employees, have recently joined the savings scheme.

July 11, 2024
July 11, 2024
NPS Investments and contributions

NPS Investments and contributions

The National Pension System (NPS) is a government-supported pension scheme for Indian citizens aged 18-70. The scheme allows subscribers to continue their NPS contributions until the age of 75, although the monthly pensions start after 60 or at retirement. NPS allows you to grow your investments via the compounding interest rate method, ensuring a bigger retirement corpus.

Also Read: NPS Enrolments: Strong Returns Attract More Corporate Subscribers, AUM Rises

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How To Earn Rs 1 Lakh Pension From NPS

Suppose you start investing Rs 2,500 monthly in NPS at 18. In that case, you can contribute 42 years till the retirement age of 60 to the NPS account. So, in 42 years, you will have contributed Rs 12.60 lakh to the NPS account. Even if we consider a conservative average annual return of 12 per cent, the corpus will become Rs 3,77,86,910 at retirement or a total gain of Rs 3,65,26,910. Of the total corpus, suppose you set aside 40 per cent or Rs 1,51,14,764 for an annuity whose annual return is at least 8 per cent; your monthly pension would be Rs 1,00,765.

 

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This calculation shows you can easily earn more than Rs 1 lakh in pension at retirement if you start investing early. Moreover, as per the recent changes in the rules by the Pension Fund Regulatory and Development Authority (PFRDA), one can contribute to the NPS account until the age of 75 or 15 more years. But you will have to wait for the lump sum and other benefits.

Delays Can Increase Challenges

However, if you have delayed your investments, you may have to contribute a much bigger sum to the NPS account to earn a similar pension. So, use your discretion and financial ability to determine when and how much to invest in the NPS scheme. Financial experts recommend not delaying retirement planning as it increases the stakes for the individual. The person may be confronted with many other financial responsibilities, such as marriage, children’s education, purchasing a house, medical emergency, etc., and they could temporarily disrupt their retirement planning journey. Starting early will give you the perfect headstart you would be looking for.

Also Read: NPS Exit Rules Upon Subscriber’s Death Post-Superannuation, Disability Or Premature Departure: Things To Know

More NPS Participation

Given the superior returns NPS provides, more and more people, including corporate and government employees, have recently joined the savings scheme. For instance, NPS data shows that as of June 15, 2024, there has been a 39.68 per cent growth year-over-year in AUM for private sector employees, compared to 25.64 per cent for central and state government employees. As in other savings plans, NPS invests in equity, debt, and alternative investment instruments and is open to all eligible Indian citizens according to its criteria.

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