While investing in this is absolutely easy and low risk, it is also important to know that NPS is a market-linked investment.
New Pension System: They say, you need money to earn money. However, it is also critical to know where to invest it so that it can give you good returns. If you want to earn money by staying risk-free, you have several investment options, including the New Pension System or NPS.
By investing in NPS, you can plan your retirement. Even if you save and invest just Rs 150 a day in NPS, you will get Rs 1 crore at the time of retirement. Investing in this is absolutely easy and low risk. Although it is also important to know that NPS is a market-linked investment.
NPS is a market-linked retirement oriented investment option. Under this scheme, the money is invested in two places, Equity i.e. Stock Market and Debt i.e. Government Bonds and Corporate Bonds. You can decide how much of the money will go into equity only during account opening. Usually, up to 75% of the money can go into equity. This means that with NPS, you are likely to get slightly higher returns than PPF or EPF.
If you have just started working and do not even have much money to invest, then you can save Rs 150 per day and invest in NPS.
Let’s say you are 25 years old at this time and you invest Rs 4,500 a month in NPS, that is, Rs 150 for a day. You will take retirement after 60 years, meaning that you will invest in it for 35 consecutive years. Now suppose you got returns at the rate of at least 8%. So when you retire, your total pension wealth will be Rs 1 crore.
Total investment: Rs 18.90 lakhTotal interest received: Rs 83.67 lakhMaturity amount or Pension Wealth: Rs 1.02 croreTotal tax saving: Rs 5.67 lakh
How much pension will you get
Now you cannot withdraw all this money in one go. You can withdraw only 60 percent of it and the remaining 40 percent you have to put in an annuity plan, from which you get a pension every month. Suppose you put 40% of your money in an annuity. You will be able to withdraw a lump sum amount of Rs 61.54 lakh and assuming the interest is 8%, then every month you will get a pension of Rs 27,353.
Annuity: 40 percentEstimated interest rate: 8%Received lumpsum amount: Rs 61.54 lakhMonthly pension: Rs 27,353
We have started investing here at the age of 25. If you start investing early then your pension corpus becomes huge. The amount of pension depends on the amount you are investing each month, at what age you have started investing and the returns you are getting. The example we have taken here is on estimated returns. It may be different in each case.