Find the monthly pension your NPS annuity part could pay you.
The portion of your corpus used for the annuity earns a payout rate you specify, converted to a monthly figure.
Monthly pension: (Annuity corpus × annuity rate) ÷ 12
When you exit NPS at retirement, part of your corpus must be used to buy an annuity, which is a plan from an insurance company that pays you a pension. This calculator takes your corpus, the share you will put into the annuity and an assumed annuity rate, and shows the monthly pension, the amount used for the annuity and the lump sum left for you to withdraw.
It helps people approaching retirement turn a large number on an NPS statement into something they can budget with. A retiring bank officer can see whether annuitising the minimum share is enough, or whether putting more into the annuity gives a more comfortable monthly pension. The question it answers is: how much pension will my NPS actually pay me each month?
1. Take the corpus at exit, C.
2. Decide the annuity share s as a percentage, at least the minimum the rules require. The calculator starts at 40%.
3. Annuity purchase amount = C × s ÷ 100.
4. Choose an annuity rate a from quotes offered by insurers for your age and plan type.
5. Yearly pension = annuity amount × a ÷ 100; monthly pension = yearly pension ÷ 12.
6. Lump sum available = C − annuity amount.
An annuity rate of 6% means the insurer pays ₹6 a year for every ₹100 you hand over, for life. Unlike a deposit, the plan may not return your capital, depending on the option chosen. A life annuity without return of purchase price usually gives the highest rate, because the insurer keeps the capital. A plan that returns the purchase price to your nominee gives a lower rate. Joint-life plans, which continue for a spouse, also pay less than single-life plans.
Insurers invest annuity money mainly in long-term government and corporate bonds. When bond yields are high, they can offer higher annuity rates, and when yields fall, annuity rates fall too. Your age also matters, because an older buyer is expected to receive payments for fewer years, so the insurer can pay more each year. The rate you lock in at purchase normally stays fixed for life. That is why the calculator asks you to assume a rate rather than using a single official figure.
Most annuities chosen at NPS exit pay the same amount every month for life. With 6% inflation, a fixed pension loses about half its purchasing power in twelve years. Some plans offer an increasing pension, which starts lower and rises each year. If you choose a level annuity, the lump sum you withdraw becomes important, because it can be invested for growth to top up the pension as costs rise.
Suresh, retiring from a bank at 60, has an NPS corpus of ₹80,00,000. He will put the minimum 40% into a life annuity and has a quote of 6.5% a year.
Answer: Estimated monthly pension ₹17,333; Lumpsum withdrawable ₹48,00,000
Assuming the annuity pays the corpus back at the end. Many plans do not.
Using an annuity rate from a quote with a different plan type or age.
Forgetting that annuity income is taxable as income, while the lump sum follows its own rules.
Annuitising the minimum without checking whether the resulting pension covers basic monthly costs.
Ignoring inflation when judging whether the monthly pension is enough.
Estimating the monthly pension from NPS before retirement.
Choosing how much of the corpus to annuitise beyond the minimum.
Comparing annuity quotes from different insurers.
Planning how to use the lump sum alongside the pension.
Why is the annuity rate a guess, not a fixed number?
Annuity payout rates are different for each insurer and plan, and also depend on interest rates at the time you buy it. There is no single fixed rate to use ahead of time.