What is Pension Plan and what are the Reasons to Adopt the Plan

retirement planning

Pension Plans are basically retirement investment plans. They basically are synonymous although they are two different words. 

Due to inflation, the cost of living could be enormously shoot up at a very high rate, medical expenses will shoot up due to age factor, so proper investment plan for retirement is an absolute necessity. You need to start planning starting at the age of 25-30 when you are at a career peak and are earning a handsome income. With proper investment planning you will be able to maintain the same standard of living that you were able to during your employment days

Retirement is a stage in the life cycle of all human beings that comes in between birth and death. Investment Plans for your retirement is crucial because you will still get some income for your survival when your active income from being employed totally stops and this would give you financial security and many times financial freedom as well and you would not have to depend on your children for your necessities of living

You need to choose retirement plans that give you guaranteed returns per IRDA guidelines. 

The contributions that you make towards your pension plans give your tax benefits that is the amount is tax free under Section 80CC of income tax 

There are pension plans that come with Life insurance cover inbuilt in it, that is say if there is an unexpected death of the policy holder then a lump sum amount mentioned in the policy goes to the nominee of the policy holder

Some pension plans do not have a life insurance so only the policy holder gets the funds till his death.

In addition to the pension plans that come inbuilt with life insurance cover /without life insurance cover there are two types of Annuity plans

  1. Immediate Annuity Plan: – This plan does not have life insurance cover. The pension starts immediately. People having large corpus fund and who want to retire early to enjoy life with family and friends are a good candidate for this plan. In this investment plan the person needs to invest a huge lump sum amount and his pension will start with immediate effect. The policy holder can decide how he needs to get his pay-out basically whether it is monthly/quarterly/half yearly/yearly. This investment plan is eligible for tax benefits under 80CC on the amount invested. In case of unexpected death of the policy holder the amount is given to the nominee
  2. Annuity Certain: -This is basically a retirement plan that runs for a certain period. Annuitant gets the funds during that term period. In case of unexpected death of the Annuitant the funds are given to the nominee.

The National Pension System (NPS) gives the measurement of the degree of financial stability which is the corpus amount of Indian citizens who have retired. Anybody over the age of 60 is eligible to use this amount in pension corpus

NPS calculator is a tool that helps to calculate the accumulated pension amount. Calculation of NPS amount is an automated process with the help of NPS calculator. Pension schemes are not market linked so you can earn guaranteed returns by investing in pension schemes in our country.

Formula to Calculate pension amounts

NPS uses compound interest to calculate returns which is a general trend for all pension schemes

The formula for NPS calculator in India is

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

A is the amount

P: – is the Principal Sum

R/r: – is the rate of interest per annum

N/n: – is the number of times the interest compounds

T/t: – is total tenure

This can be comprehended with the following example

Say you are 34 years old, and your monthly contribution is 3000. You go on investing for 26 more years from the age of 34. Assuming rate of interest is 10% per annum

National Pension plan calculation is as follows

Total Principal Investment = 3000 *12 *26 = 9.36 lakhs

Total Amount on maturity = 44.35 lakhs

You get the following advantages in using the National Pension Scheme (NPS) calculator

  • You don’t have to do any manual calculations by using the calculator you get the exact accurate 100% results every time you use it
  • You get to know the exact pension amount from using this calculator. From the pension amount obtained you will be able to plan for a bright future ahead
  • It is a one-stop shop for doing the online calculation

How you can use the NPS calculator

  • Enter the amount you want to invest every month as your retirement corpus in NPS scheme
  • Enter what is your present age using the slider bar
  • Enter the rate of interest returns you are expecting by moving the slider bar

That’s it. Within seconds you can check the accurate results and plan for your pension at the retirement age for a secured future during retirement tenure