The National Pension Scheme (NPS) is a scheme launched by the Indian government which focuses on providing a monthly pension for people above 60 years of age. It works in such a way that, the scheme holder whether a private sector employee or a public sector employee has to make regular contributions on a monthly basis. These contributions made by the people are fairly invested by the central government, but the subscriber has to keep contributing on a monthly basis till he/she reaches the retirement age (60 years).
Thus, here comes the role of NPS Calculator. It tells how much amount an individual will get based on the contributions made by him, at the time of his/her retirement. But, it is difficult to calculate the interest rate earned by the scheme due to government securities and corporate debt. The interest rates for the year 2013-2014 were calculated to be between 12% and 14%.
There is no fixed amount registered by the government to be contributed to the National Pension Scheme. It is the subscriber's choice that how much amount he/she want to contribute in the NPS account. But the fact is, the more you contribute, the more you will generate at the end.
If you are going to subscribe for NPS, then let us consider your age to be 35 years. Then, this scheme will go on till you reach the retirement age. This means that you will be making the contributions on a monthly basis for the next 25 years till you reach the age 60. Now, again let us consider that you will be contributing an amount of Rs 2000 on a monthly basis to your NPS account with an expected interest rate of 8%.
The NPS calculator now will generate the total invested amount which turns out to be Rs 6, 00,000 and after calculating the monthly interest earned, the amount comes up to be Rs 12, 98,372. Therefore, with the total tax saving of Rs 1, 80, 000, the total pension generated will be Rs 18, 98, 372.
Now, if you tend to withdraw 20% of your total savings and on the other hand, investing the rest 80% as an annuity plan with the interest rate of 8%, you will acquire the monthly pension of Rs 10, 124 and the 20% amount you withdrawn will be Rs 3, 79, 674.
Although, several tax laws may result in affecting the return on investments affecting the NPS calculator's accuracy. Also, NPS calculator does not account for other charges made by the scheme.