NPS 75% Equity vs NPS 25% Equity: National Pension System (NPS) offers Active Choice and Auto Choice to its subscribers. In Active Choice, the subscriber can actively choose their investment options and allocation. The subscriber can pick a Pension Fund Manager (PFM), asset class, and their allocation percentage. Asset classes available are equity (E), corporate debt (C), government bonds (G) and alternative investment funds.

An investor can pick a maximum of 75 per cent equity allocation up to the age of 50.

As far as the debt allocation is concerned, they can go high on it with government bonds (maximum 100 per cent allocation allowed), corporate bonds (maximum 100 per cent) and alternate investment options (maximum 5 per cent).

Risk increases with high equity allocation and decreases with a high debt ratio.

Overall returns are not fixed and depend on the equity performance and interest rate scenarios.

But for a 27-year-old employee with a Rs 33,000 basic salary and DA, where can the estimated retirement corpus be if they pick 75 per cent equity and 25 per cent government bonds or 25 per cent equity and 75 per cent government bonds? See calculations to know –

Age and maximum NPS equity allocation

One can allocate 75 per cent equity up to the age of 50. As the age increases, the allocation limit decreases.

What we will calculate  

We will calculate the estimated corpus for a 27-year-old employee whose basic pay and DA is Rs 34,000.

We are expecting a 24 per cent monthly contribution from them to their NPS corpus (10 per cent employee contribution and 14 per cent employer contribution).

At Rs 34,000 basic pay and DA, it will be Rs 8,160.

The annual increase in the investment will be 5 per cent.

The asset allocation will be like this:

Condition 1: Equity (75 per cent), government bonds (25 per cent) 
Condition 2: Government bonds (75 per cent), equity (5 per cent) 

Here are the results- 

Retirement corpus at 75% equity, 25% governemnt bonds   

• Total investment- Rs 78,39,844
• Investment return- 12.09 (taken from NPS’ official website)
• Estimated retirement corpus- Rs 5,57,25,399 
• Estimated lump sum withdrawal (60 per cent)- Rs 3,34,35,239
• Estimated monthly pension (at 40 per cent annuity purchase and 6.75 per cent return)- Rs 1,25,382   

Retirement corpus at 25% equity, 75% governemnt bonds   

• Total investment- Rs 78,39,844
• Investment return- 9.92 (taken from NPS’ official website)
• Estimated retirement corpus- Rs 3,67,75,659 
• Estimated lump sum withdrawal (60 per cent)- Rs 2,20,65,695
• Estimated monthly pension (at 40 per cent annuity purchase and 6.75 per cent return)- Rs 82,745

(Disclaimer: These are estimates. Actual calculations may vary.)