An NPS calculator is an online tool that helps you assess how your investments in the National Pension System (NPS) will grow over the investment tenure. The NPS, often referred to as the National Pension Scheme, is a voluntary investment scheme offered in India to help investors create a safety net for their post-retirement life. By using a National Pension Scheme calculator, you can obtain more clarity about how much to invest to ensure you build the required corpus.
Many NPS return calculators also show you the minimum amount that must be converted into an annuity. These details help you estimate the total corpus amount, the annuity and the monthly pension you can expect when you retire.
The National Pension Scheme is a long-term retirement savings plan regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It is a voluntary scheme that is available for employees from private, public and unorganised sectors. However, individuals in the armed forces cannot invest in this scheme.
When a subscriber opts for NPS, they are required to regularly contribute to their pension account at periodic intervals. The amount contributed is invested in different asset classes like equity, corporate debt securities, government bonds and alternative investment funds. At the end of the investment tenure, a minimum specified portion of the corpus must be converted to an annuity product, which becomes a source of regular pension income for the investor. The rest of the corpus can be withdrawn
You should meet the following eligibility criteria if you want to invest in the National Pension Scheme:
The typical NPS calculator uses a specific formula to find the expected corpus from the investor’s contribution over a defined tenure. The formula for NPS calculation essentially involves finding the future value of the amount invested.
This formula can be summarised as follows:
FV = P x [{(1 + r)n — 1} ÷ r] x (1 + r)
Here:
- FV = Future value or the maturity amount.
- P = Monthly contribution.
- r = Monthly interest rate (i.e. annual return rate ÷ 12 ÷ 100).
- n = Total number of months in the investment period .
Let us discuss an example to understand how the National Pension Scheme calculator works. Say an investor aged 20 years decides to start investing in the NPS scheme. They contribute Rs. 10,000 each month, till they attain the age of 60. Now, assuming an annual return rate of 9% and a total investment period of 40 years (or 480 months), this is how the NPS pension calculator formula works:
Total corpus or maturity amount:
= P x [{(1 + r)n — 1} ÷ r] x (1 + r)
= 10,000 x [{(1 + 0.0075)480 — 1} ÷ 0.0075] x (1 + 0.0075)
= 10,000 x [{1.0075480 — 1} ÷ 0.0075] x 1.0075
= 10,000 x [{36.1099 — 1} ÷ 0.0075] x 1.0075
= 10,000 x [35.1099 ÷ 0.0075] x 1.0075
= 10,000 x 4681.32 x 1.0075
= 4,71,64,299 (approximately)
When you use an NPS calculator, you will find that the exact amount of corpus in the example discussed above is actually Rs. 4,71,64,302. Of this, at least 40% or Rs. 1,88,65,720.80 must be converted into an annuity product.
While the formula may be easy, manually calculating the maturity amount is not only tedious but also prone to rounding errors. This is why it is easier and more effective to use a retirement planning calculator to determine the precise amount of corpus you will have in your NPS account.
An NPS return calculator can be beneficial to investors in many ways. Check out the main advantages of using this free online financial planning tool.
If you want to enjoy the benefits of an NPS calculator, Samco Securities offers you this tool free of cost online. Here is how you can use the Samco NPS calculator to your advantage.
With these inputs, the NPS calculator from Samco Securities shows you key details like the total investment made, the interest earned thereon, the maturity amount and the minimum annuity investment required. These figures can be crucial for your investment planning.
An important aspect of investing in the National Pension Scheme is the set of tax benefits it offers. Check out the different deductions available for NPS investments.
Now that you have a clear idea of what an NPS calculator is and how it works, all you need to do is decide if the National Pension Scheme aligns with your investment goals. To make this decision easier, you must compare the NPS scheme with other avenues like the Employees' Provident Fund (EPF) Public Provident Fund (PPF), mutual funds and fixed deposits.
Here is a tabulated comparison of these investments in terms of returns, risk and liquidity.
| Investments | Returns | Risk | Liquidity |
|---|---|---|---|
| NPS | Ranges from 9% to 12% — but can vary based on the investments chosen | Risk levels depend on the asset class chosen | Relatively liquid because partial withdrawals are allowed up to 25% of the corpus after a specified period |
| EPF | 8.25% per annum | Low risk because it is backed by the government | Partial withdrawals are allowed for specific reasons only |
| PPF | 7.10% per annum | Low risk because it is backed by the government | Partial withdrawals are allowed after a specified period, limited to one withdrawal per year |
| Mutual Funds | Depends on the performance of the underlying asset | Risk depends on the mutual fund portfolio | Generally liquid because they can be sold easily (except for funds with a specified lock-in period) |
| Fixed Deposit | Varies from one bank to another | Less risky than market-linked investments | Liquid, subject to penalties |
Easy & quick
1. Register on SCORES portal
2. Mandatory details for filling complaints on SCORES
Name | PAN | Address | Mobile | Number | E-mail ID
3. Benefits
Effective Communication
Speedy redressal of the grievances
Brokerage Calculator