Govt employees who got a job after 2004 must opt for a new pension scheme for pension purposes. In addition, read this article to download the NPS maturity Excel calculator.

In addition, the government introduced the Unified Pension Scheme for govt employees, which will come into effect in April 2025.

And government employees can choose one of UPS or NPS.

How do you calculate the NPS maturity corpus for government employees? …

Let’s assume that your age is 24 years, and your Basic + DA is Rs 30,000.

In addition, let’s assume that your basis + D.A. will increase by 8% every year till retirement.

And also, assume that the return on investment from your NPS account is 9% based on the last 20 years of NPS performance for government employees.

Moreover, your NPS contribution for the first year will be. 10%*30,000 + 14%*30,000 = 3000 + 4200 = 7200*12 = 86,400.

Here, the government employee will contribute 10% of Basic + DA for NPS and at the same time, the government contributes 14% of Basic + DA towards NPS.

You can see in the above image that the monthly contribution by you is Rs. 3,000.

In addition, the government contribution per month for the first year is Rs. 4,200.

And the total monthly contribution by you and the government is Rs. 7,200.

Finally, the total first-year contribution is Rs. 86,400.

But this monthly contribution of Rs. 7,200 will earn roi of 9% p.a.

So, the first year-end NPS corpus will be Rs. 89,909.

I have calculated the NPS maturity for you based on the assumptions we made earlier.

In addition, you can download the Excel calculator below for your reference.

And you can only edit the yellow cells in the exel template, and anyone can calculate the NPs maturity for themselves.

In addition, the first column in the calculator contains your age.

And the 2nd column contains the yearly fresh contributions, which are increased by 8% p.a.

In addition, the 3rd column contains the NPS corpus at the beginning of the year.

And the 4th column contains the return on investment from NPS Corpus at the beginning at 9% p.a.

Moreover, the 5th column contains the year-end NPS corpus NPS at the beginning of the year + fresh NPS contribution + profit from NPS at the beginning of the year.

Finally, you can see the NPS maturity amount at the end of the cell in column 5.

And this corpus is 6 crore 30 lakh approximately for the case study that we have assumed earlier in this article.

However, 60% of the corupus accumulated can be withdrawn at the time of retirement.

And that corpus in our case study is 3 crore 78 lakh.

Again, an annuity plan must be bought with 40% of the NPS corpus at retirement.

And that corpus available for annuity purposes is 2 crore 52 lakh.

Does this 40% corpus enough for your entire retirement life?…

We need a few more assumptions to do this analysis.

Let’s assume that the inflation pre- and post-retirement age is 6%.

In addition, present monthly expenses are Rs. 25,000.

And present yearly expenses are Rs. 3,00,000 (Rs. 25,000*12).

Moreover, the return on investment postretirement is 5.5%. (risk-free or low-risk, i.e., annuity from a life insurance company).

And the retirement expenses needed for 40 years, including your 30 years in retirement life + your wife’s 10 years extra as she is 10 years younger than you.

Does 40% NPS corpus enough for your entire retirement life? …

 

You can see in the above Excel template that the first column contains your age in retirement life.

In addition, the 2nd column contains the retirement corpus at 40% of NPs maturity.

and the 3rd column contains the yearly expenses in retirement life, which will increase by 6% p.a.

Moreover, the 4th column contains the corpus left after withdrawal of yearly expenses.

And the 5th column contains the profit from NPS Corpus at year end at 5.5% p.a.

Finally, the 6th column contains the NPS corpus left at year end.

However, you can see that the corpus is becoming zero and the corpus left has gone into negative values after 10 years of retirement.

So, it is clear that if you buy an annuity with only 40% of NPS corpus, that is not enough to take care of your entire retirement life.

Does 100% NPS maturity mean enough to take care of the entire retirement life? …

 

You can see in the above Excel calculator template that the 100% NPS maturity is sufficient to take care of 24 years of retirement life only.

In addition, I have seen many government employees gift their retirement benefits to their children.

But I strongly suggest NPS subscribers: Please do not do that mistake of gifting 60% withdrawn from NPS maturity to the children.

Finally, I strongly suggest investing separately for the purpose of the retirement corpus apart from default NPS contributions.

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Also read about the NPS Vatsalya scheme: All you need to know…

And read about the NPS Vatsalya Scheme Budget Benefits 2025…

Also read about NPS charges. All you need to know…

And read about NPS exit rules—all you need to know…

Also read this article to download the SSY maturity calculator…