For many, National Pension System (NPS) has quietly evolved from a tax-saving tool into a serious retirement-planning vehicle. With its low costs, disciplined structure and higher equity exposure than traditional pension products, more investors are now treating NPS like a long-term SIP. But a question often surfaces: what kind of pension can NPS actually deliver if you commit a regular sum every month?
The answer is not just about how much you invest, it is also about when you start. NPS is built on the power of compounding, and the difference in pension outcomes between starting at 30, 40 or 50 can be staggering. A decade’s delay doesn’t just reduce your corpus; it can shrink your monthly pension by more than half.
Before you decide whether a high monthly contribution is worth it, it helps to see how the numbers play out across different ages, return assumptions and annuity rates. And that’s where the picture becomes clearer and more compelling.
At the age of 30
If you begin at age 30 and invest Rs 1 lakh a month at an assumed annual return of 10%, your total investment of Rs 3.6 crore grows to nearly Rs 20.69 crore by age 60 (assuming 75% in equities and 25% in government securities). At retirement, you can withdraw up to 60% (Rs 12.41 crore) tax-free, while the remaining 40% must be used to buy an annuity. At a 6% annuity rate, this works out to a monthly pension of about Rs 4.13 lakh.
If returns are higher say 12% the corpus rises to around Rs 30.64 crore, translating into a pension of roughly Rs 6.12 lakh per month.
At the age of 40
Starting later reduces the power of compounding. If you begin at 40, contributing Rs 1 lakh a month for 20 years, your Rs 2.4 crore investment grows to about Rs 7.2 crore. Using the same withdrawal and annuity assumptions, the pension comes to approximately Rs 1.44 lakh a month.
At the age of 50
Starting at 50 leaves very little time: a 10-year contribution of Rs 1.2 crore grows to around Rs 2 crore, yielding a monthly pension of roughly Rs 40,057.
The pattern remains consistent for smaller contributions too. A Rs 10,000-per-month investment from age 30 can generate a pension of around Rs 41,386. Starting at 40 reduces it to Rs 14,404 and beginning at 50 brings it down to roughly Rs 4,000. The message is clear starting early makes a massive difference.
What does NPS offer?
Two account types: Tier I (mandatory for pension savings) and Tier II (optional with flexible withdrawals).
Withdrawal rules: At 60, up to 60% of the corpus can be withdrawn tax-free; the remaining 40% must be used to buy an annuity. Early exit allows only 20% withdrawal.
Investment choices: Equity (E), Corporate Debt (C), Government Securities (G), and Alternative Investments (A) under Active Choice; or lifecycle-based Auto Choice with equity exposure up to 75%.
Extended contribution window: You can keep contributing until age 75.
To build a meaningful retirement pension through NPS, start early and stay consistent. Longer horizons, disciplined investing and the force of compounding significantly boost your eventual pension, while delays sharply limit your outcomes.
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