Pension Calculator: How is Pension Calculated?

Earn interest up to 8.60% p.a. by investing in a Bajaj Finance Fixed Deposit | Rated CRISIL AAA/ STABLE and [ICRA]AAA(stable) Invest Now

About Pension Calculator

Nowadays it has become pretty hard to make a saving, but it is very essential. So to keep track of the betterment of your future you must start saving before your retirement. Using a pension calculation formula or basic pension calculator you can easily evaluate a value that you need to save per month for the betterment of your post-retirement age. But while making your pension plans you might come across many queries for instance how much pension will I get? All of such questions are explained below in detail.

What is a Pension?

A fund of retirement which an employee receives either from the employer, employee, or both, where usually the employer is covering the biggest contribution percentage. When an employee is retired, the employee is paid in the form of an annuity which is calculated on the conditions of pension. Now if the employee has opted for the commutation of pension then the amount of pension is paid in the form of a lump sum to the receiver. With the help of the pension calculation formula, the total pension you will receive can be calculated. You can even use an online pension calculator to estimate the amount you'll be receiving at the end.

Importance of Pension

There are several benefits and importance associated with investing in a pension plan. Some of them are:

Guaranteed Income -

There is a fixed and guaranteed income after your retirement so that you can lead a stable and financially independent lifestyle.

Tax Savings -

Under the Income Tax Act, 1961, sections 80C, 80CCC and 80CCD allow tax exemptions. Some of the pension plans offer a way in which you can save tax efficiently.

Liquidity -

Pension plans are a form of liquidity. Although only a few schemes offer withdrawal at accumulation stage, you can rely upon those savings during the time of need.

Power of Compounding -

Pension plans allow you to save regularly for a long period. This helps you gain a huge retirement corpus. Due to the power of compounding, the longer the period of your investment, the higher your corpus after your investment.

Builds Savings Habit -

With the reason to save money regularly, pension plans inculcate a sense of savings habit into you during your 20s and 30s. This is later paid off with the corpus that you gain during your retirement.

What is a Pension Calculator?

A pension plan calculator or a pension calculator analyzes the total amount you will need to accumulate at the time of your retirement. The pension calculator demonstrates the amount of lump sum and the tentative pension which is expected by a subscriber of an NPS after the age of 60 or after the maturation. This depends on the following factors:

Monthly regular contributions
Percentage of the Basic Pension Reinvested corpus to buy an annuity
Rates of returns of the investment along with the annuity for which it is selected

How to Calculate Pension?

A monthly pension calculator or pension fund calculator helps you to keep an approximate value of the total amount you require to save per month to financially secure yourself in the future. If you are wondering how to calculate pension amount then by using the online pension calculator you can keep yourself updated. To know how is pension calculated, following the given steps:

Search for a basic pension calculator that is available online
Fill in all the required personal details such as birth date, accommodation time, and age of your expected retirement
Then fill in your income details
Finally, input your saving details

Moreover, you can also use another formula to calculate your pension. Let us have a look into it.

Pension Formula

Each pension is estimated according to the pension formula which is already set and is free to make the payment on the plan. The retirement calculator of the pension formula is based on the account of your pensionable salary and the total years of your service. In short the longer duration you'll be working and the longer you contribute towards your plan the higher amount of pension you'll be receiving at the end. The basic pension calculator formula used online utilizes the formula:

(Pensionable salary×Pensionable service)/ 70

If you want to know how to calculate commutation of pension, then the formula is:

Pension commutation formula = Amount of 1 to be commuted x 12 x purchase value for age next birthday

How Does the Pension Plan Calculator Work?

The pension plan calculator works on the principle of the power of compounding. By inputting your details on the pension commutation formula or basic pension formula, you will know the aggregated money that you will accumulate after your retirement.

Rules for Calculation

There are some basic rules for the calculation of pension using the pension annuity calculator and they are:

	Net Service in years
		Less than 10	10 to less than 25	25 to less than 33	80 to less than 85	85 to less than 90	90 to less than 95	95 to less than 100	100
Basic Pension	Retirement Date On or After 30/12/2008	0	Last month's Emoluments /2 x Service Period / 50 Minimum Amount:3500	Last month's Emoluments /2 Minimum Amount:3500	-	-	-	-	-
Basic Pension	Retirement Date Before 30/12/2008	0	Last month's Emoluments x Service Period/(2x33) Minimum Amount: 3500	Last month's Emoluments x Service Period/(2x33) Minimum Amount: 3500	-	-	-	-	-
Enhanced Family Pension	Retirement Date On or After 30/12/2008	0	Last month's Emoluments /2 x Service Period / 50 Minimum Amount:3500	Last month's Emoluments /2 Minimum Amount:3500	-	-	-	-	-
Enhanced Family Pension	Retirement Date Before 30/12/2008	0	Last month's Emoluments x Service Period/(2x33) Minimum Amount:3500	Last month's Emoluments x Service Period/(2x33) Minimum Amount:3500	-	-	-	-	-
Normal Family Pension		0	Last month's Emoluments x 0.3 Minimum Amount:3500	Last month's Emoluments x 0.3 Minimum Amount:3500	-		-	-	-
Additional Basic Pension		-	-	-	Basic Pension x 20/100	Basic Pension x 30/100	Basic Pension x 40/100	Basic Pension x 50/100	Basic Pension x 2
Retirement Gratuity		Basic Pension Amount x Service Period/4	Basic Pension Amount x Service Period/4	Basic Pension Amount x Service Period/4	-	-	-	-	-
Death Gratuity (If Applicable)	Service Period from 5 till 20	Last month's Emoluments x 12	Last month's Emoluments x 12	Last month's Emoluments x 12	-	-	-	-	-
Death Gratuity (If Applicable)	Service Period more than 20	Basic Pension Amount x Service Period/4	Basic Pension Amount x Service Period/4	Basic Pension Amount x Service Period/4	-	-	-	-	-
Pension Commuted (Commutation Age is more than 17 year		0	Basic Pension Amount x Commutation Percent/100	Basic Pension Amount x Commutation Percent/100	-	-	-	-	-
Reduced Monthly Pension after Commutation (Commutation Age is more than 17 years)		0	Basic Pension Amount - Amount of Pension Commuted	Basic Pension Amount - Amount of Pension Commuted	-	-	-	-	-
Total Commutation (Commutation Age is more than 17 years)		0	Pension Commuted x Commutation Rate x 12	Pension Commuted x Commutation Rate x 12	-	-	-	-	-
Provisional Pension (Commutation Age is more than 17 years)	Retirement Date On or After 30/12/2008	0	Last month's Emoluments /2 x Service Period / 50 Minimum Amount:3500	Last month's Emoluments /2 Minimum Amount:3500	-	-	-	-	-
	Retirement Date Before 30/12/2008	0	Last month's Emoluments x Service Period/(2x33) Minimum Amount:3500	Last month's Emoluments x Service Period/(2x33) Minimum Amount:3500	-	-	-	-	-
Provisional Pension Commutated (Commutation Age is more than 17 years)		Provisional Pension x Commutation Percentage/100	Provisional Pension x Commutation Percentage/100	Provisional Pension x Commutation Percentage/100	-	-	-	-	-
Provisional Pension Payable/month (Commutation Age is more than 17 years)		Provisional Pension - Amount of Provisional Pension Commuted	Provisional Pension - Amount of Provisional Pension Commuted	Provisional Pension - Amount of Provisional Pension Commuted	-	-	-	-	-
Commutation value of Provisional Pension (Commutation Age is more than 17 years)		Pension Commuted x Commutation Rate x 12	Pension Commuted x Commutation Rate x 12	Pension Commuted x Commutation Rate x 12	-	-	-	-	-

Benefits of a Pension Calculator

Online pension calculator is the most useful tool available for estimating your financial plans with your assumptions. Below mentioned are some of the benefits of the pension contribution calculator:

Updates of your saving amount -

Despite your time to time savings you are not able to keep a record of the amount you might require after your retirement. However, with the use of a pension annuity calculator, you can calculate pension amount you need to save for your post-retirement age.

To keep an update of the approximate amount for post-retirement age -

Once you have known the amount of savings needed to be done the next most important thing is the amount of money you need to invest to secure the goal. So the use of a pension annuity calculator provides you the rough amount that you need to invest.

Best Pension Schemes

If you are wondering which pension plans are the best so that you can easily take care of yourself and your family in your post-retirement age then here are some of the best schemes where you can apply:

LIC Jeevan Akshay 6 Plan
LIC Jeevan Nidhi Plan
SBI Life Saral Pension Plan
Bajaj Markets' ULIP Pension Plan

Glossary

NPS- National Pension Scheme
Annuity- Fixed amount of income that you are entitled to receive once you subscribe to a pension plan
Commutation Pension- It is a portion where the pensioner is paid in the form of a lump sum instead of the pension's periodic payment
IRS- Internal Revenue Service
Pension- An allowance received by the employee after the retirement
Pensionable salary- It is the average salary of the month in the recent 12 months of the service
Pensionable service- It is the total years you have been employed till the day you retire
Accumulation period- The period in which you invest your savings into your pension plan

Our Recommended Pension Plans

It is necessary to think about the future after your employment. Provident funds and pensions are not quite enough. ULIP Pension Plan available on Bajaj Markets helps you to save for a secured tomorrow. It is a top-rated pension scheme that ensures returns as high as 25% over an investment period of 5 years. It has tax benefits, high AUM (Assets Under Management), the flexibility of choosing among four different investment portfolios, and the least caste structure.

ULIP Top Pages

ULIP in Depth

Government Investment Schemes

If you are having a pension plan then you'll get an amount of retirement that you will receive from the provider of your insurance timely. As you retire, a retirement plan or a pension plan in India provides you a regular monthly income.

Even though the early withdrawal of money before the age of fifty-nine and a half isn't recommended at all as you might have to pay a penalty of 10% above the regular income tax according to the IRS. Although, yes, you can, there are some guidelines for the early withdrawal of your pension plan and those are if you have encountered any sudden disability or you are not able to bear your medical expenses which are above 7.5% of your gross income.

Using pf pension calculation the following benefits you can avail for the future post-retirement age:

Life expectancy increases
Decreases the stress due to the insufficient pension of the employer
You can freely spend your life without being dependent on anyone
You can pursue your interest even after your retirement without any worries

Yes, you can use the pension calculator in excel.

If you wish to surrender the pension plan before it gets matured then a value of complete surrender gets added to your yearly income and you are taxed based on the tax slab.

Yes, you can easily get the amount you'll be receiving by using a monthly pension calculator, which will make it a lot easier for you to keep a track of the amount you need to save every month.