Speaking on NPS scheme, Kartik Jhaveri, Director — Wealth at Transcend Capital said, "NPS is a voluntary contribution pension scheme in which an investor enjoys exposure of both equity and debt. However, an investor can't have more than 75 per cent exposure in equity. However, for a young investor who is ready to take high risk, 60 per cent exposure in equity and 40 per cent in debt would be a good and balanced exposure." He said that assuming long term equity return of 12 per cent and long term debt return of 8 per cent, we can expect NPS return to the tune of 10 per cent in long term.
To get higher monthly pension post-retirement, Kartik Jhaveri of Transcend Consultant advised investors to start investing in NPS scheme as soon as possible.
Assuming ₹5000 monthly investment in NPS scheme at the age of 20 till retirement or say till the investor attains 60 years of age, the NPS calculator suggests that one would get around ₹1.91 crore lump sum maturity amount and ₹1.27 crore annuity value that will get re-invested in annuity for monthly pension.
Speaking on return that one can expect from annuity, SEBI registered tax and investment expert Jitendra Solanki said, "One can expect at least 6 per cent annual return on annuity."
So, assuming 6 per cent annual return on ₹1.27 crore annuity value, one would get ₹63,768 monthly pension, suggests NPS calculator.
Advising NPS account holders to invest lump sum amount in SWP (Systematic Withdrawal Plan) to enhance once monthly income, Pankaj Mathpal, MD & CEO at Optima Money Managers said, "Like SIP where an investor invests in monthly mode to accumulate wealth, SWP allows an investor to use one's wealth with monthly withdrawal facility. By putting one's lump sum amount in SWP, one would be able to consume one's wealth for longer period of time expecting at least 8 per cent return on one's money."
On how much one can expect from one's ₹1.91 crore lump sum maturity amount from SWP, Pankaj Mathpal of Optima Money Managers said, "As life expectancy is rising, one is advised to invest lump sum amount for 25 years post-retirement. If a person invests ₹1.91 crore in SWP for 25 years, then at 8 per cent annual return, one would get around ₹1.43 lakh monthly income from the SWP only."
So, if a NPS account holder, who has invested ₹5,000 per month for 40 years, invests h is lump sum maturity of ₹1.91 crore in SWP, he or she would be able to get more than ₹2 lakh monthly pension ( ₹1.43 lakh monthly from SWP and ₹63,768 monthly from annuity). However, one must remember that ₹63,768 monthly income from annuity will continue till the investor is alive whereas ₹1.43 lakh from SWP is for 25 years only.
On SWPs that one can look at for investing Pankaj Mathpal recommended the following:
1] ICICI Prudential Balanced Advantage Fund;
2] Nippon India Asset Allocator FoF; and
3] Canara Robeco Equity Hybrid Fund.
