How NPS Pension is Calculated: Corpus, Lump Sum & Monthly Pension

Guides · Calculator · Updated 2026

The National Pension System (NPS) is one of the most efficient retirement‑saving tools, but its two‑stage structure — accumulation and annuitisation — confuses many. You build a corpus over your working years, and at age 60 you must use at least 40% of it to buy an annuity that gives you a monthly pension. The remaining 60% can be withdrawn as a tax‑free lump sum. Understanding how these two stages interact is key to planning a comfortable retirement. This article explains the math with a concrete example.

How the NPS corpus grows

Your monthly contribution grows with compound interest. The return depends on your fund allocation — equity, corporate bonds, and government securities. Historically, a 10% average annual return has been achievable for moderate‑equity portfolios. The future value of a monthly investment (PMT) over N months at monthly rate r is calculated as:

Corpus = PMT × [(1 + r)^N − 1] / r
where r = annual rate ÷ 12, N = (60 − current age) × 12.

Step-by-step: calculate your NPS pension

Open the NPS Calculator tool.
Enter your current age, monthly contribution, expected annual return (default 10%), and the percentage of corpus you want to use for annuity (40% minimum).
The tool calculates the corpus at 60. It then splits it into lump‑sum withdrawal and the annuity portion.
Using the annuity rate (default 6%), the monthly pension is derived as (annuity portion × annuity rate) ÷ 12.

💡 Tip: Even a small increase in the monthly contribution now can dramatically boost your pension later. Starting at age 30 with ₹5,000/month at 10% return yields a corpus of around ₹1.2 crore by 60. If you can step up your contribution by 10% each year, the final figure can double.

Worked example: ₹5,000/month, 10% return, age 30

Current age = 30, monthly contribution = ₹5,000, return = 10%, retirement age 60. Total months = 360. Monthly rate = 10% ÷ 12 = 0.8333%. Corpus = 5000 × [(1.008333)^360 − 1] ÷ 0.008333 ≈ ₹1.13 crore. If 40% is annuitised (₹45.2 lakh), the lump sum is ₹67.8 lakh. With a 6% annuity rate, the monthly pension = (45,20,000 × 6%) ÷ 12 = ₹22,600 per month. Use the NPS calculator to adjust the variables and see your own retirement picture.

Frequently Asked Questions

Can I withdraw the entire NPS corpus at 60?

No. As per current rules, at least 40% must be used to purchase an annuity. The remaining 60% can be withdrawn as a lump sum. This ensures a regular pension income post‑retirement.

What happens if I change jobs?

NPS is portable. Your PRAN (Permanent Retirement Account Number) remains the same. You can continue contributions through the new employer or independently via the NPS app.

What is the expected annuity rate?

Annuity rates vary by insurer and market conditions. Currently, they range between 5.5% and 7%. The calculator defaults to 6% as a conservative estimate.

Is the NPS lump sum taxable?

Up to 60% of the corpus withdrawn as lump sum is tax‑exempt. The annuity income (monthly pension) is taxable as per your slab in the year you receive it.

Is it free and private?

Yes — the tool runs entirely in your browser, free, with no sign‑up and nothing uploaded to a server.

Try the NPS Calculator