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LIC NPS Calculator

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The Life Insurance Corporation of India (LIC), one of the most prominent and trusted insurance and investment groups in the country, offers a wide array of financial products and services. One such service is the National Pension Scheme (NPS), a government-backed retirement savings plan designed to provide Indian citizens with a stable post-retirement income.

As the NPS offers potential returns based on investment choices, calculating the potential corpus and annuity can be challenging. This is where the LIC NPS Calculator comes into play. It is an invaluable tool that allows prospective and existing subscribers to estimate their retirement savings and possible annuity payouts based on their contributions and expected returns.

Let’s understand the LIC NPS Calculator better and go through its features, benefits, operative steps, and more.

What is the LIC NPS Scheme?

The LIC National Pension Scheme (NPS) is an initiative launched in collaboration between the Government of India and the Pension Fund Regulatory and Development Authority (PFRDA). Primarily meant to provide a post-retirement financial safety net for Indian citizens, the NPS can be accessed through multiple banks and leading financial institutions.

A unique aspect of this government-endorsed scheme is its broad inclusivity. Every Indian resident, ranging from young adults at 18 years old to those nearing retirement at 60, can enrol in the NPS.

By regularly contributing to this scheme throughout their working years, individuals can build a substantial financial corpus. This accumulated amount not only ensures a comfortable retirement but also caters to financial requirements arising in the twilight years of one's life.

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Comprehending LIC NPS Calculator

The LIC NPS Calculator is a digital tool designed to predict the retirement corpus that a subscriber might receive under the National Pension Scheme. This tool factors in the consistent contributions made throughout the scheme's duration to give an estimate of the lump sum available at retirement.

Almost every bank and financial institution offering the NPS provides its users with an NPS Calculator. This tool acts as a financial compass, allowing users to monitor their ongoing contributions and predict their retirement benefits.

To get a clear picture of the potential retirement payout, users of the LIC NPS Calculator need to enter specific details -

  • Current Age of the Subscriber: The starting point and the duration of the scheme
  • Monthly Investment Amount: The sum that you're planning to deposit regularly into the NPS
  • Expected Return on Investment (ROI): An estimate of the annual returns that you anticipate from the scheme
  • Annuity Purchase Percentage: The portion of the corpus that you intend to use to buy an annuity and ensure a regular pension
  • Projected Annuity Rate: The expected annual rate of the pension received from the annuity

With these inputs, the LIC NPS Calculator swiftly computes the lump sum that one can anticipate receiving, thereby simplifying the retirement planning process.

Advantages of LIC NPS Calculator

LIC NPS calculator plays a crucial role for subscribers with respect to retirement planning, as it simplifies computations and offers a clear picture of post-retirement finances.

Here are its standout benefits -

  • Clear Insight into Retirement Corpus: The calculator assists users in determining the lump sum they're poised to receive post-retirement. Contrary to some beliefs, contributions to the National Pension Scheme are investments, not liabilities.
  • Understanding Withdrawal Limits: Upon reaching retirement, a subscriber cannot claim the entire corpus in one sweep. This tool clearly demarcates that only up to 60% can be withdrawn, with the rest earmarked for annuity investments.
  • Annuity Investment Clarity: The calculator underscores the necessity to invest 40% of the accumulated amount in annuities, ensuring a consistent pension post-retirement.
  • Speed and Precision: It eliminates the need for complex formulas, presenting results almost instantly.

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LIC NPS Calculation Formula

To compute the amount receivable under the LIC NPS upon retirement, a compound interest formula is employed. This formula automates the calculation when the necessary details are fed into the NPS Calculator.

Although the calculator does the heavy lifting, one can also use this formula manually to determine potential returns.

The formula is expressed as -

FV = P (1 + r / n) ^ nt

Where:

  • FV represents the Final Value or maturity amount
  • P stands for the Principal Sum or the regular contribution
  • r denotes the annual Rate of Interest
  • n indicates how frequently the interest is compounded in a year
  • t is the tenure or total number of years the contribution is made

Illustration

Let's take the case of Mr. Ahmed, who is a LIC NPS subscriber. Every month, he deposits INR 3,000 into his NPS account. Given his current age, he'll be making these contributions for the next 26 years. 

If we assume a consistent annual Rate of Interest (ROI) of 10% -

  • Over 26 years, Mr. Ahmed's total Principal contribution would be around INR 9.36 lakhs (i.e., 3,000 x 12 x 26).
  • Using the compound interest formula, the maturity amount, or the sum Mr. Ahmed that can expect at the end of his tenure in the LIC National Pension Scheme, would be approximately INR 44.35 lakhs.

Wrapping It Up

The LIC NPS Calculator is one of the best tools for financial planning. While preparing for post-retirement life can often be daunting, instruments like the LIC NPS Calculator can make the journey significantly clearer and more manageable.

By demystifying complex calculations and providing tangible insights into potential retirement benefits, the tool provides peace of mind and fosters informed decision-making. From understanding the fundamentals of annuities to visualising the cumulative impact of consistent contributions, the LIC NPS Calculator covers all bases and helps you make a truly informed choice.

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