The amount of pension you receive from NPS depends on several factors, including your contributions, investment returns, and the annuity you choose

 

Thanks to Shri  GSV Raja Sir (VP -head of HR) for wonderful session regarding NPS Bzy HDFC member.

The amount of pension you receive from NPS depends on several factors, including your contributions, investment returns, and the annuity you choose. Generally, at retirement, you can withdraw up to 60% of your NPS corpus as a lump sum, and the remaining 40% must be used to purchase an annuity that provides a monthly pension. 

Here's a more detailed breakdown:

Factors Influencing Your NPS Pension: 

Contributions:

The amount and frequency of your contributions directly impact the size of your retirement corpus. 

Investment Returns:

The performance of your chosen investment options (equity, corporate bonds, government securities) affects the growth of your corpus. 

Annuity Purchase:

The type of annuity plan you choose (e.g., life annuity, annuity with return of purchase price) will influence the monthly pension amount. 

Age at Entry and Exit:

The earlier you start contributing and the later you exit (up to the age of 70), the longer your money has to grow, potentially leading to a larger corpus. 

How Annuity Works:

At retirement, you can withdraw up to 60% of your corpus as a lump sum. 

The remaining 40% (or more, if you choose) must be used to purchase an annuity from a PFRDA-registered insurer. 

Annuities provide a regular monthly income for the rest of your life, or as per the terms of the chosen annuity plan. 

Example:

If your NPS corpus at retirement is ₹1 crore, and you opt to withdraw 60% as a lump sum (₹60 lakhs), the remaining ₹40 lakhs would be used to purchase an annuity. The annuity provider would then calculate your monthly pension based on the annuity rate and the amount invested. 

Important Considerations:

Minimum Annuity: A minimum of 40% of the corpus must be used for annuity purchase. 

Maximum Lump Sum: You can withdraw a maximum of 60% of the corpus as a lump sum. 

Small Corpus: If your corpus is less than ₹5 lakhs, you can withdraw the entire amount as a lump sum. 

Taxes: Lump sum withdrawals are tax-free up to 60% of the corpus, while annuity income is taxable as per your income tax slab. 

Tools for Estimation:

NPS Trust Calculator:

The NPS Trust website provides a pension calculator to estimate your potential pension based on various factors. 

Other Online Calculators:

Several financial institutions offer NPS calculators that can help you estimate your pension. 

It's recommended to consult with a financial advisor for personalized guidance on NPS and retirement planning.