NPS Annuity Rate in 2025 – How Much Pension Your Corpus Can Buy?

Planning for retirement in India often comes down to one important question: “How much monthly pension will I actually receive from my savings?” The National Pension System (NPS) offers both tax benefits and long-term wealth creation, but your actual retirement income depends heavily on the annuity rate you get in 2025 and beyond.

In this guide, we break down NPS annuity rates in 2025, the types of annuity plans you can choose, how pension is calculated, and practical examples to estimate your monthly income. By the end, you’ll know how to make better decisions for your retirement corpus.

Introduction to NPS Annuity

When you retire at 60, NPS rules require you to invest at least 40% of your accumulated corpus in an annuity plan from an Annuity Service Provider (ASP). The remaining 60% can be withdrawn as a lump sum (tax-free, subject to prevailing rules).

The annuity converts your savings into regular monthly income. Your pension amount depends on:

• Your total NPS corpus at retirement
• The percentage you allocate to annuity (minimum 40%, can be more)
• The annuity rate offered by your chosen provider
• The type of annuity option selected

👉Learn more about Retirement Planning in India and why NPS plays a key role in building post-retirement income.

Latest NPS Annuity Rates in 2025

Annuity rates under NPS vary across service providers and plan types. Typically, they range between 5.5% to 7.5% annually in 2025. This means, for every ₹1 lakh invested in annuity, you may expect around ₹5,500 to ₹7,500 annually as pension income (before tax).

Available Annuity Plans by PNB MetLife

Here are some annuity plans offered by PNB MetLife:

1. Immediate Annuity Plan (UIN:117N095V09)

A non-linked, non-participating annuity product that provides guaranteed lifetime income in exchange for a lump-sum premium paid upfront. It includes flexible payout frequencies (monthly, quarterly, half-yearly, yearly), annuity options like single life, joint life, return of purchase price, and even increasing annuity with escalation, plus options for spouse coverage and legacy protection through return of purchase price.

2. Grand Assured Income Plan (GAIN) (UIN: 117N134V07)

A deferred, individual, non-linked, non-participating annuity plan. You pay premiums (single or installments), accumulate a retirement corpus, and then receive a lifetime guaranteed income. Key perks include locking in annuity rates now, choosing deferment periods and payout frequencies, selecting multiple annuity options, and even a joint life variant where spouse continues receiving income after one's demise.

👉 Compare this with other safe investments in our guide: NPS vs. PPF – Which is the Better Investment Option?

How to Choose the Best Annuity Plans

Choosing the right annuity plan shapes your pension’s structure and duration. NPS offers several options tailored to diverse retirement needs, family obligations, and financial goals. Below are the primary annuity plans available in 2025, with detailed insights to guide your choice:

• Single Life Annuity (without Return of Purchase Price): This plan offers the highest monthly pension as it does not return the invested amount after the annuitant’s death. Payments continue for your lifetime and stop thereafter, with no benefits for nominees. Ideal for those without dependents or prioritizing maximum income, a ₹20 lakh investment at 7% yields ~₹11,667/month (₹20,00,000 × 7% ÷ 12). However, heirs receive nothing, making it less suitable for legacy planning.
• Life Annuity with Return of Purchase Price (ROP): This option provides a slightly lower pension because the initial investment (purchase price) is refunded to your nominee or legal heir upon death. It balances lifetime income with legacy planning. For example, at 6.2%, a ₹20 lakh investment generates ~₹10,333/month (₹20,00,000 × 6.2% ÷ 12), with ₹20 lakh returned to the nominee. This suits retirees who want to secure their family’s financial future.
• Joint Life Annuity with Return of Purchase Price: This ensures the pension continues for your spouse at the same rate after your death, until their death, after which the purchase price is returned to the nominee. It offers the lowest monthly pension due to the extended payout period. For instance, at 6%, a ₹20 lakh investment yields ~₹10,000/month (₹20,00,000 × 6% ÷ 12). Best for couples where the spouse lacks independent income, it provides lifelong security for both.,
• Annuity with Escalation (e.g., 3% or 5% yearly increase): Offered by select ASPs like LIC, this plan increases the pension annually to counter inflation, starting with a lower initial payout. For example, a ₹20 lakh investment at 5.5% with 3% escalation starts at ~₹9,167/month (₹20,00,000 × 5.5% ÷ 12), rising to ₹9,442/month in year two, ₹9,725/month in year three, and so on. This is ideal for retirees anticipating a long retirement and rising costs.,

Each plan involves trade-offs: higher pensions reduce benefits for heirs, while ROP or joint life options lower monthly income but enhance security. NPS mandates lifelong or joint life annuities, excluding fixed-period options (e.g., 5, 10, or 20 years) to ensure sustained income. Consider your health, life expectancy, dependents, and inflation when choosing.

Factors Affecting Your Pension Amount

Your NPS pension depends on multiple factors beyond the annuity rate. Understanding these helps optimize your retirement strategy:

• Corpus Size at Retirement: A larger corpus yields a higher pension. For example, a ₹1 crore corpus with 40% (₹40 lakh) at 6.5% generates ₹21,667/month, while a ₹50 lakh corpus yields ₹10,833/month. Early contributions and equity-heavy funds (historically 10–12% returns) boost corpus growth.
• Annuity Option Chosen: Plans with ROP or joint life features reduce monthly pensions due to extended liabilities. A single life annuity at 7% offers more than a 6% joint life plan but lacks spousal benefits. Choose based on family needs and financial goals.
• Age at Annuity Purchase: Older annuitants receive higher rates due to shorter expected payout periods. A 65-year-old might get 7.2%, while a 60-year-old gets 6.8%, slightly increasing the pension. Health conditions may also secure enhanced rates.
• Service Provider Rates: ASPs set rates based on investment strategies and market yields. LIC’s 7.1% for single life may outperform ICICI Prudential’s 6.7%. Comparing quotes maximizes returns.
• Market Interest Rates: Annuity rates correlate with long-term government securities (e.g., 10-year G-Secs at 6.5%–7% in 2025). Rising RBI rates or gilt yields increase annuity rates, boosting pensions.

Additional factors include health (enhanced rates for medical conditions) and allocation beyond 40% (higher allocations increase pensions but reduce lump sums). Review your NPS portfolio regularly and consult a financial advisor.

NPS Annuity Calculator: Step-by-Step Guide

Estimating your NPS pension sets realistic expectations. Follow these steps to calculate your 2025 pension:

1. Determine Your Retirement Corpus: Estimate your corpus based on contributions, growth (e.g., 10% for equity funds), and tenure. A ₹50 lakh corpus is achievable over 20–30 years.
2. Allocate the Annuity Percentage: NPS requires at least 40% for annuity. For a ₹50 lakh corpus, 40% is ₹20 lakh. Higher allocations (e.g., 50%, ₹25 lakh) increase pensions.
3. Select an Annuity Rate: Choose a rate within 5.5%–7.5% (e.g., 6.5% for life annuity with ROP) based on ASP quotes.
4. Calculate Annual Pension: Multiply the annuity investment by the rate. For ₹20 lakh at 6.5%, annual pension is ₹20,00,000 × 6.5% = ₹1,30,000.
5. Convert to Monthly Pension: Divide by 12. ₹1,30,000 ÷ 12 ≈ ₹10,833/month (before tax).
6. Adjust for Taxes and Options: Apply your tax slab (e.g., 20% tax reduces ₹10,833 to ~₹8,666). Adjust for escalation or joint life plans, which lower initial pensions but offer future benefits.

Example Calculations for Different Corpus Sizes

Below are pension estimates for various corpus sizes at a 6.5% annuity rate with 40% allocation:

• ₹25 Lakh Corpus: 40% (₹10 lakh) at 6.5% yields ~₹5,416/month, suitable for modest needs with supplementary income.
• ₹50 Lakh Corpus: 40% (₹20 lakh) yields ~₹10,833/month, supporting comfortable retirement in smaller cities.
• ₹1 Crore Corpus: 40% (₹40 lakh) yields ~₹21,667/month, enabling a secure retirement with discretionary spending.

At a 7.5% rate with 50% allocation (₹50 lakh) on a ₹1 crore corpus, the pension rises to ~₹31,250/month (₹50,00,000 × 7.5% ÷ 12). Figures assume life annuity with ROP; joint life or escalation plans yield less initially. Use calculators for tailored estimates.

Pros & Cons of Higher Annuity Purchase

Allocating more than 40% to an annuity increases your pension but has trade-offs:

Pros

• Assured Lifelong Pension Income: Higher allocations ensure larger pensions, reducing the risk of outliving savings. For a ₹50 lakh corpus, 60% (₹30 lakh) at 6.5% yields ₹16,250/month vs. ₹10,833/month at 40%.
• Protection for Spouse (Joint Annuity): Joint life plans secure your spouse’s income, e.g., ₹10,000/month at 6% on ₹20 lakh for both lifetimes.
• Predictable Returns: Annuities provide fixed returns, immune to market volatility, ideal for risk-averse retirees.
• Customizable Options: Escalation plans (e.g., 3% annual increase) counter inflation, e.g., ₹9,167/month rising to ₹11,885/month after 10 years.

Cons

• Lower Liquidity: Higher allocations reduce the tax-free lump sum. For ₹50 lakh, 60% leaves ₹20 lakh vs. ₹30 lakh at 40%, limiting funds for emergencies or investments.
• Taxable Annuity Income: Pensions are taxed per your slab (e.g., 20% tax on ₹10,833/month leaves ~₹8,666). High slabs reduce net income.
• No Capital Appreciation: Annuities offer no growth, unlike equities (10–12% returns), limiting long-term wealth.
• Limited Flexibility: Annuity terms are fixed post-purchase, with capital inaccessible except in ROP plans.

Weigh these based on lifestyle, dependents, and other income sources. Retirees with other savings may prefer lump sums, while NPS-dependent retirees may choose higher allocations.

👉 To explore more ways to reduce tax burden, read Tax Benefits of Using Pension Schemes.

How to Choose the Best Annuity Provider

Selecting an ASP impacts your pension. Consider:

• Annuity Rate Offered: A 0.5% difference matters; ₹20 lakh at 7% yields ₹11,667/month, vs. ₹10,833/month at 6.5%.
• Plan Flexibility: Look for ROP, joint life, or escalation options. LIC offers escalation, SBI Life emphasizes joint life.
• Claim Settlement Ratio: Choose ASPs with ratios above 98% (e.g., LIC, SBI Life) for reliable payouts.
• Service and Accessibility: Providers like HDFC Life offer user-friendly platforms for pension management.
• Financial Stability: LIC’s government backing or ICICI’s strong financials ensure low risk.
• Customization Options: Some ASPs offer tailored plans, like higher escalation rates.

Request quotes from at least three ASPs and consult a financial advisor. Check PFRDA for updates on empanelled ASPs.

Conclusion & Next Steps

NPS annuity rates in 2025 (5.5%–7.5%) are pivotal for your pension, but corpus size, plan type, and ASP choice matter. To maximize income:

• Start Early: Contribute regularly, favoring equity funds (10–12% historical returns).
• Compare Providers: Request quotes from LIC, SBI Life, etc., for optimal rates and plans.
• Use Calculators: NPS Trust or ASP tools help estimate pensions accurately.
• Diversify: Combine NPS with SCSS or PNB MetLife plans for flexibility.
• Monitor Taxes: Plan for taxable pensions (e.g., 30% tax on ₹10,833/month leaves ~₹7,583).
• Stay Updated: Check PFRDA and ASP quotes for rate or regulation changes.

Strategic planning ensures a balanced retirement portfolio with guaranteed income and flexibility.