How much pension will NPS give me?

It depends on two rates, not one. On ₹10,000 a month from 30 to 60 growing at 10%, the corpus reaches about ₹2.28 crore, and annuitising the minimum 40% at 6% gives roughly ₹45,600 a month. Change the annuity rate to 5% and the pension falls to about ₹38,000 on the same corpus.

Why is the pension so much smaller than the corpus suggests?

Because only 40% of the corpus is annuitised, and that portion pays the annuity rate rather than your accumulation return. A ₹2.28 crore corpus annuitised at 40% and 6% yields ₹5.47 lakh a year. Expecting 10% on the whole corpus would predict nearly four times that.

Do I have to buy an annuity?

Yes, with at least 40% of the corpus on exit at the normal age, and the remaining 60% may be taken as a tax-free lump sum. Below a small corpus threshold the whole amount can be withdrawn. You can annuitise more than 40% if you would rather have income than cash.

Is NPS better than EPF?

They differ in kind. EPF pays a declared rate with no market risk and no compulsory annuity; NPS is market-linked with historically higher returns but locks 40% into an annuity. NPS also carries a tax deduction above the 80C limit, which EPF does not. Most salaried people have EPF anyway and use NPS on top rather than instead.

Is the NPS lump sum taxable?

The lump sum taken on exit at the normal retirement age is exempt. The pension from the annuity is taxable as income in each year you receive it. So the tax benefit is on the way in and on the lump sum, not on the pension.

What return should I assume?

That depends on your asset mix, which under NPS you partly choose. Equity-heavy allocations have historically returned more with more variation; the government-securities option less with less. Bear in mind that a lifecycle option shifts towards debt as you age, so a flat 12% across thirty years is optimistic even if equity delivers it early on.

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NPS Calculator

Project an NPS corpus and the pension it buys, keeping the growth rate and the annuity rate separate.

Understand the calculation

Calculation logic, formula, example and guardrails behind the estimate.

How it works

Contributions compound monthly at the accumulation return you set, from your current age to your exit age. The result is the corpus, before anything is done with it.

On exit the corpus splits. At least 40% must buy an annuity, and the rest may be taken as a lump sum. The pension is the annuity corpus times the annuity rate — a level annuity pays that rate on the capital for life.

More detail

Keeping those two rates apart is the point of this calculator. A corpus growing at 10% does not buy a pension at 10%. Annuity rates track long-term government bond yields and are typically 5% to 7%, so the pension is a fraction of what the accumulation rate might suggest.

The annuity-rate scenario above holds the corpus constant and varies only the rate. It shows the pension changing by 50% across a plausible range, on identical contributions — which is why this is the assumption worth being conservative about.

For the provident fund side of the same salary, see the EPF calculator.

For what to do with the lump sum, use the SWP calculator.

To check whether the total is enough to retire on, try the FIRE calculator.

Formula

Corpus = Σ C × (1 + r/12)^(months remaining); Pension = Corpus × a% × annuity rate ÷ 12

Two independent rates, deliberately. The corpus uses the market return r; the pension uses the annuity rate, which is set by an insurer on the day you retire and is unrelated to how your fund performed.

C: Monthly contribution.
r: Annual accumulation return, as a decimal.
a%: Share of the corpus annuitised — at least 40%.
annuity rate: What an insurer pays per year on the annuity corpus.

Worked example

₹10,000 a month from age 30 to 60, growing at 10%, with the minimum 40% annuitised at 6%.

01Total contributed₹36,00,000
02Corpus at 60about ₹2.28 crore
03Used to buy the annuity (40%)about ₹91 lakh
04Taken as a lump sum (60%)about ₹1.37 crore
05Monthly pensionabout ₹45,600

A corpus of ₹2.28 crore produces a pension of roughly ₹45,600 a month, because only 40% of it is annuitised and that portion pays 6% rather than 10%. Anyone expecting a pension proportional to the corpus at the accumulation rate would predict nearly four times as much. The lump sum is the larger part of the benefit here, and what you do with it matters more than the pension does.

Important considerations

01
The annuity rate is the weak link
You control your contribution and, to a degree, your return. You do not control what annuity rates will be on the day you retire, and that single number sets your pension. Planning on 6% rather than 7% is the prudent choice, because the downside of being wrong is a permanently smaller income you cannot revisit.
02
The lump sum is usually the bigger prize
At the minimum 40% annuitisation, 60% of the corpus arrives as tax-free cash. In the example above that is ₹1.37 crore against a ₹45,600 monthly pension. How that lump sum is deployed will affect your retirement more than the annuity does — the SWP calculator shows one way of turning it into an income you can adjust.
03
The tax deduction is the clearest benefit
NPS offers a deduction over and above the Section 80C limit, which for a top-bracket taxpayer is an immediate and certain return on the contribution. That is a stronger argument for the scheme than any projection of its corpus, because it does not depend on assumptions about rates decades away.

Limitations

The annuity rate available in thirty years is unknowable. It tracks long-term bond yields, which have fallen for decades, so today's 6% may not be on offer.
The accumulation return depends on your asset allocation and, under a lifecycle option, shifts towards debt automatically as you age — which lowers the effective return over the last decade in a way a single flat rate does not capture.
Charges are excluded. NPS is among the cheapest options available, but fund management and transaction fees still reduce the corpus slightly.
Annuity variants differ substantially. One that returns the capital to your nominee pays a lower pension than one that does not, and this calculator models the simple level annuity.

Frequently asked questions

Common questions about the nps calculator and the assumptions behind it.

Next useful checks

Move from this result to the next decision without hunting through the full calculator list.

FIRE CalculatorConvert savings into a retirement independence target.SWP CalculatorModel withdrawals from a retirement corpus.

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Disclaimer

This calculator is provided for general information and planning only. It is not investment, tax or legal advice, and it does not take your personal circumstances into account. Outputs are estimates based on the assumptions stated on this page, exclude taxes and charges unless said otherwise, and market-linked returns are not guaranteed — the value of investments can fall as well as rise. Lending terms, rates and eligibility are decided by the lender. For advice on your own situation, speak to a qualified professional, several of whom you can consult on Finvestalk.