The Indian government launched the National Pension System (or Scheme) or NPS so that residents can receive proper financial assistance to live their retired lives without worrying about money. Using this scheme, anyone who is more than 18 years old can build a pension corpus until they become 60 years old. But you need a proper National Pension Scheme calculator to plan your retirement fund investments properly. After all, if you don’t invest the right amount of money and make a solid financial plan, you might not be able to create an adequate pension corpus. Fortunately, this calculator can help you make a solid financial plan by giving your valuable insights. But how is it going to do that? Let’s find out!

What is a National Pension Scheme (NPS) Calculator?

The NPS pension calculator is an online tool that helps investors calculate how much money they can gain, what the maturity amount of their NPS investments will 

be, or the amount of pension they are going to receive. The calculator makes these estimations according to your contribution towards the NPS plan, the investment tenure, and other data that you input into it.

In simple words, the calculator helps you understand how much you need to invest in growing your investment to a specific pension amount. Since the NPS plan grows your investment using the power of compound interest, it can give out a sizable amount of money after your investment matures.

An Example of NPS Return Calculation

As we have mentioned, this retirement fund calculator collects the data you enter to calculate your total pension fund. So, let’s say Mr. Suresh wants to invest Rs. 50,000 per year toward the NPS scheme. His age is 30 years right now, and he wants to withdraw 40% of the total NPS funds upon his retirement.

Considering that the average return on investment can be anywhere between 8% – 10% per year, the calculator will evaluate all the factors and give you figures similar to these ones:

  • Monthly pension: Rs. 35,409
  • Withdrawal amount on retirement: Rs. 54,28,303
  • Wealth gained: Rs. 39,68,308

Please note that the figures here are just approximations and are presented here just to show what kind of results you can receive. The actual pension plan calculator will provide you with the correct estimations as long as you input accurate data.

How Can an NPS Calculator Help You?

There are multiple ways an NPS calculator can help you. Here’s a list of some of the most expected assistance this calculator can provide you with:

  • The calculator will help you understand how much money you can receive after your investment matures. This pension fund is a reliable investment for better retirement life and not a liability. So, this calculator will estimate your total corpus if you keep investing money into the scheme every month or year.
  • Because of the current legislature, you cannot withdraw the entire pension fund accumulated via the NPS scheme even after you retire. Plus, at least 40% of the total NPS fund has to be invested in annuities. What’s more, you also have to pay tax on the remaining 60% (or less) of the fund. The online pension calculator will help you figure out all these numbers accurately.
  • An NPS calculator won’t make a mistake as long as the data you have entered into it is correct. The pension calculation takes various factors into consideration that will take way too long to calculate manually. And even if you end up successfully calculating it, there is a possibility that you made a mistake in the calculation. You will understand how difficult it is to manually calculate the maturity amount of the NPS investments if you try it personally. Fortunately, the NPS calculators employ special pension calculator formulas to give you accurate results.
  • Some NPS calculators can also show you how much money you need to pay in tax once you withdraw a lump sum from your NPS investment after you retire.

The Formula Used by the NPS Calculators

Just like any other national pension plan around the globe, NPS or the National Pension Scheme online also uses compound interest rates to calculate the return on your investment.

Here’s the formula that the NPS calculators of India use to find out the corpus of the mature NPS fund:

A = P * (1 + R/N) ^ (NT)

Here,

  • A = Total amount
  • P = Principal sum for investment
  • R = Annual interest rate
  • N = Number of times the principal amount compounds
  • T = Tenure

Let us give you an example. Let’s say you are 34 years old right now, and you’re planning to contribute Rs. 3,000 per month toward the NPS scheme. Clearly, you will be investing Rs. 3,000 per month for the next 26 years towards this pension scheme. Now, let’s assume that the expected annual return rate is 10%.

Here’s the detail the pension plan calculator will give you using this data:

  • Total invested principal = Rs. 9.36 lakhs
  • Estimated sum upon maturity = Rs. 44.35 lakhs

How to Use an NPS Calculator

Using most online NPS calculators is quite an easy job. You just need to follow these steps:

  1. Type the amount you would like to invest in the NPS scheme every month or year.
  2. Now, enter your expected return rate.
  3. Finally, type your current age in the online NPS calculator, and you will be able to see the maturity amount and the minimum annuity investment amount.

Please note: Some calculators might also ask you for the total percentage of annuity purchase and the expected annuity return rate to show you how much money you will receive every month as a pension.

Wrapping It Up

NPS is a crucial investment scheme that will allow you to receive a monthly pension after your retirement, along with a massive chunk of money. However, to make sure you plan this investment in the right way, you need the aid of a proper National Pension Scheme calculator. The calculator will help you calculate how much money you need to invest every month or year to accumulate a satisfying amount of money for your retired life. So, use the calculator and plan your pension returns today.

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