How the NPS corpus and pension are calculated
The National Pension System is a defined-contribution scheme: your pension depends on how much is contributed, how long it compounds and what annuity rate you get at exit. Central government employees who joined on or after 1 January 2004 are covered by NPS, with the option of the Unified Pension Scheme from 1 April 2025.
Step 1 — Monthly contribution
Government employees contribute 10% of basic pay plus DA and the employer adds 14%, so 24% of pensionable pay flows into Tier-I every month. Private subscribers choose their own contribution amount.
Step 2 — Compounding to age 60
Contributions are invested in equity, corporate bond and government securities funds. This calculator compounds each year's contributions at your expected return and increases the contribution base by your annual pay growth, which includes increments and DA revisions.
Step 3 — Exit split at 60
Up to 60% of the corpus can be taken as a tax-free lump sum. The remaining 40% or more must purchase an annuity from a PFRDA-empanelled insurer, which fixes your lifelong monthly pension.
Step 4 — Monthly pension from annuity
Monthly pension equals the annuitised amount multiplied by the annuity rate divided by twelve. Rates currently range from about 6% to 7% depending on whether you choose a return-of-purchase-price or joint-life option.