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NPS scheme: 12,000 monthly saving can fetch 1.78 lakh pension per month

NPS scheme: Keeping 60:40 equity and debt exposure will help NPS account holder to reap around 10 per cent NPS interest rate in long-term, say experts. (iStockphoto)Premium
NPS scheme: Keeping 60:40 equity and debt exposure will help NPS account holder to reap around 10 per cent NPS interest rate in long-term, say experts. (iStockphoto)

  • NPS scheme: An NPS account holder can choose up to 75 per cent equity exposure in one's NPS account. However, best practice is to keep the equity exposure at 60 per cent and debt exposure at 40 per cent, believe tax and investment experts

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NPS scheme: National Pension System or NPS is a retirement benefit Scheme introduced by the Government of India to facilitate a regular income post-retirement to all NPS account holders. Due to its post-retirement income feature, NPS is also known as government-backed pension scheme. However, if we go by tax and investment experts' views, one who has low risk appetite can get up to 1.78 lakh monthly income investing 12,000 per month in their NPS account. They advised NPS subscribers to use SWP (Systematic Withdrawal Plan) and enhance their monthly income post-retirement.

Speaking on NPS scheme, SEBI registered tax and investment expert Jitendra Solanki said, "An NPS account holder can choose up to 75 per cent equity exposure in one's NPS account. However, best practice is to keep the equity exposure at 60 per cent and debt exposure at 40 per cent. It suits to those NPs subscribers too, who have low risk appetite. Keeping 60:40 equity and debt exposure will help NPS account holder to reap around 10 per cent NPS interest rate in long-term."

Solanki said that if an investor invests 12,000 per month in one's NPS account for 30 years keeping equity-debt exposure in 60:40 ratio and buys annuity worth 40 per cent of the net NPS maturity amount, one would get 1,64,11,142 lump sum amount and 54,704 monthly pension as annuity would give at least 6 per cent return annual return.

NPS Calculator: Source NPS Trust
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NPS Calculator: Source NPS Trust

However, there may be some people who would like to buy annuity worth 50 per cent of the net NPS maturity amount. In that case, the NPS calculator suggests that the monthly pension would go up to 68,330 while lump sum withdrawal amount will come down to 1,36,75,952.

NPS Calculator: Source NPS Trust
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NPS Calculator: Source NPS Trust

Advising NPS account holders to use the lump sum amount in SWP to enhance one's monthly income; Amit Gupta, MD at SAG Infotech said, "For a total investment of 1.36 crore for a period of 25 years at an expected rate of 8 per cent per annum, the investor would be able to make monthly withdrawals of 1,02,464.455, every month for 25 years."

Likewise, if the NPS account holder has kept is annuity exposure at 40 per cent, in that case its lump sum withdrawal will be 1.64 crore.

On how much one would get after investing 1.64 crore in SWP; Pankaj Mathpal, MD & CEO at Optima Money Managers said, "Investing 1.64 crore in SWP for 25 years would help an investor withdraw 1,23,560 or 1.23 lakh per month for above said years if the SWP return is 8 per cent per annum."

That means, if a person invests 12,000 per month in one's NPS account for 30 years keeping equity debt exposure in 50:50 ratio, then one would get around 1.70 lakh per month — 68,330 from annuity return and 1.02 lakh from SWP.

However, if an NPS account holder invests 12,000 per month in NPS account keeping annuity exposure at 40 per cent, in that case one would be able to generate around 1.78 lakh per month — 54,704 from annuity and 1.23 lakh from SWP.

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