NPS pension: how much will you really get at retirement?

The NPS, short for National Pension System, is an account to prepare for your retirement, regulated by the Indian government. You put money into it while you work. This account invests your money in equities and bonds until you exit. ^[1]

• The main account is called Tier I: it is the one that builds your retirement and lowers your tax. ^[2]
• The Tier II account is optional: you can withdraw your money from it at any time, but it gives no tax saving. ^[2]
• Tier II needs an active Tier I: you cannot open Tier II on its own. ^[2]
• The NPS watchdog is the PFRDA (Pension Fund Regulatory and Development Authority), the public authority that sets its rules. ^[2]

The minimum in the main account (Tier I) is ₹1,000 a year. ^[3] There is no upper limit: you can contribute as much as you want. ^[2]

• You contribute whenever you like: ₹1,000 once in the year, or ₹10,000 every month.
• Below ₹1,000 in a year, your account is frozen: it stays in your name and is reactivated with your next contribution. ^[3]
• Example: ₹5,000 a month is ₹60,000 a year (5,000 × 12). Over 30 years, you put in ₹18 lakh from your own pocket.

Your NPS money is invested in 4 types of investment, which you split yourself or let the NPS split according to your age. ^[1]

• E, equities: at most 75% of your Tier I account in the common NPS schemes. ^[1] Since 1 October 2025, if you do not work for the government, high-risk schemes go up to 100% equities: more possible growth, but more risk. ^[2]
• C, corporate bonds and G, government bonds: up to 100% each. A bond is a loan that pays you interest: you lend ₹10,000, and the borrower pays you, for example, ₹500 a year. ^[1]
• A, alternative funds, investments outside regular equities and bonds: at most 5%, in Tier I only. ^[1]
• You can change your allocation 4 times a year and change your fund manager, the company that invests your money, once a year. ^[2]

The NPS promises no return: what it earns follows the markets and your choice of investment. ^[3]

At normal exit, with a corpus above ₹12 lakh, you withdraw up to 80% as a lump sum, and at least 20% goes into buying an annuity. ^[2] Normal exit comes at 60, or after 15 years of contributions if those 15 years end before you turn 60. ^[2]

• Corpus of ₹8 lakh or less: you can withdraw everything as a lump sum. ^[2]
• Corpus between ₹8 and ₹12 lakh: you withdraw up to ₹6 lakh as a lump sum. The rest of the corpus comes back to you as an annuity or as instalments spread over at least 6 years. ^[2]
• Early exit (before 60 and before 15 years of contributions): you withdraw at most 20% as a lump sum, and at least 80% goes into an annuity. Below ₹5 lakh, you can withdraw everything. ^[2]
• You can stay in the NPS until 85 and delay your exit. ^[2]

### Worked example, step by step 1. You contribute ₹10,000 a month from 30 to 60, that is ₹1,20,000 a year for 30 years. 2. From your own pocket, you put in ₹36 lakh (1,20,000 × 30). 3. Your money earns 5% a year after adjusting for rising prices. At 60, your NPS would be worth about ₹79.7 lakh in today's rupees. 4. Your corpus is above ₹12 lakh: you withdraw 80% as a lump sum, about ₹63.8 lakh. The remaining 20%, about ₹15.9 lakh, buys your annuity. 5. Each year, you withdraw 4% of your ₹63.8 lakh, that is ₹2.55 lakh: you get about ₹21,260 a month, on top of your annuity. The tool applies this 4% to your whole corpus of ₹79.7 lakh, about ₹26,576 a month: it does not set aside the 20% for the annuity. 6. If your ₹63.8 lakh earns 5% every year, it gives you ₹3.19 lakh in the first year, more than your withdrawals. Your corpus then does not shrink, and you get that ₹21,260 every month, for life. If it earned nothing, your corpus would last 25 years, until you turn 85 (63.8 ÷ 2.55).

In the old tax regime, your NPS contributions give you an extra deduction of up to ₹50,000 on top of the ₹1.5 lakh limit under section 80C. ^[4] This deduction is called section 80CCD(1B).

• Simplified example: you pay 20% tax on your top slab and you contribute ₹50,000. Your tax goes down by ₹10,000 (50,000 × 20%).
• In the new tax regime, this ₹50,000 deduction does not exist. ^[4]
• Your employer's contribution is still deducted in both regimes: up to 14% of your salary in the new regime. ^[4] Example: on a salary of ₹50,000 a month, up to ₹7,000 a month.
• The limits mentioned apply to assessment year 2026-27, the one for income from April 2025 to March 2026. ^[4]

The biggest mistake is putting your emergency savings in the main account: that money cannot be withdrawn whenever you want, it follows the NPS exit rules. ^[2]

• Forgetting the minimum contribution of ₹1,000 a year: your account would be frozen. ^[3]
• Choosing Tier II to lower your tax: it gives no deduction. ^[2]
• Keeping too little in equities when retirement is far away: at 30, you have 30 years to ride out the falls.