Business News Desk: Even if you stop getting salary after retirement, the expenses continue. In such a situation, it is very important to have a good system of regular income, so that you can spend your retirement life without any financial problems. Schemes like National Pension System (NPS) and Employees Provident Fund (EPF) have been created for this very purpose. If you invest in both these options with the right strategy, you can get better income after retirement. If you also add Senior Citizen Savings Scheme (SCSS), then retirement planning will become stronger. We will tell you how a retirement fund of around Rs 3 crore can be created with a monthly salary of Rs 40 thousand. But first let us know briefly what EPF and NPS mean.
National Pension System
The National Pension System (NPS) is an optional retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). In this scheme you can invest regularly during your working age. At least 40% of the amount raised this way has to be used to buy an annuity, which gives you a regular monthly income. You can withdraw the remaining 60% amount in lump sum upon retirement. Contributions made to NPS are divided into debt and equity and invested as per your age and the scheme chosen. Therefore, the returns on investment are not fixed but linked to the market.
Employees Provident Fund
Employees’ Provident Fund (EPF) is a government-run retirement savings scheme in which regular contributions are made by salaried employees and their employers. This fund grows at a fixed interest rate and can be withdrawn in lump sum at the time of retirement.
NPS + EPF means Integrated Pension Scheme
If you use both NPS and EPF, you can get better regular income after retirement. Both the schemes together work as an integrated pension plan, which can provide you with a large sum as well as regular and stable income after retirement. You can also understand how this strategy works through the calculations given below.
epf calculation
Current age of investor: 30 years
Retirement Age: 60 years
Period of contribution to EPF: 30 years
Monthly Salary: Rs 40,000
Annual increase in salary: 5%
EPF interest rate: 8.1%
Estimated corpus at the time of retirement: Rs 1,99,51,298 (approximately Rs 2 crore)
nps calculation
Current age of investor: 30 years
Retirement Age: 60 years
Investment period in NPS: 30 years
Monthly contribution to NPS account: Rs 5000
Estimated annual return on NPS: 9%
Estimated corpus at the time of retirement: Rs 91,53,717
Minimum investment for annual income: Rs 1,50,000 Rs 36,61,487
Both the schemes together will create a fund of Rs 2.91 crore.
It is clear from the above calculations that after retirement, the combined amount of funds of both EPF and NPS will be more than Rs 2 crore 91 lakh. Out of this, it is necessary to invest at least 40% of the NPS fund i.e. Rs 36.61 lakh in annuity. Since the entire EPF fund will be available for your lump sum withdrawal, investors can also increase investment in annuity for more regular income.
How to use the corpus of EPF and NPS
If the entire Rs 91.53 lakh of NPS is invested in annuity, then as per the current rates of Annuity Service Providers (ASP), one can get a monthly pension of around Rs 50 to 52 thousand with the option of refund of the purchase price.
Even after this, the investor will be left with an EPF corpus of around Rs 2 crore.
Rs 30 lakh from EPF corpus can be invested in Senior Citizen Saving Scheme.
According to the current interest rate of SCSS, an investment of Rs 30 lakh will get Rs 61,500 i.e. Rs 20,500 monthly interest every 3 months.
In this way, by combining the annuity income of NPS and the interest of SCSS, a monthly income of more than Rs 70 thousand can be generated every month.
Even after this investment for regular income, more than Rs 1.6 crore of EPF will be left aside, which can be invested elsewhere to continuously increase the accumulated capital.
