Pension calculations and checklists
Retirement income plan example — combining SCSS, annuity, EPS and a lump sum into monthly income
A worked retirement income plan for a couple at 60: bucket the EPF and NPS money, use SCSS and an annuity for steady income, and test whether withdrawals are sustainable.
A workable retirement income plan in India usually has three layers: guaranteed income (EPS pension, annuities, UPS or a government pension), steady interest for the first years (SCSS, deposits), and a reserve that is invested for growth and drawn down slowly. In the worked example below, a couple with ₹1.1 crore at retirement and spending of ₹55,000 a month can cover just over half their needs from EPS, SCSS and a small annuity, and must withdraw about 5% a year from the rest, which is on the high side. All rates are illustrative: SCSS was 8.2% for deposits in October–December 2026, and annuity rates depend on age, option and the day of purchase.
The couple
| Item | Amount (illustrative) |
|---|---|
| Suresh, private-sector employee, retiring at 60 | |
| Lata, homemaker, aged 57 | |
| EPF balance at retirement | ₹60 lakh |
| NPS Tier I corpus | ₹40 lakh |
| Savings and deposits | ₹10 lakh |
| EPS pension | ₹4,500 a month (₹54,000 a year) |
| Household spending | ₹55,000 a month (₹6.6 lakh a year), including health insurance |
| Home | Owned, no loan |
Step 1: Take the NPS exit decisions
Suresh is a non-government subscriber with more than ₹12 lakh, so under the December 2025 exit rules he can take up to 80% (₹32 lakh) as a lump sum and must annuitise at least 20% (₹8 lakh). Because Lata has no income of her own, he chooses a joint-life annuity, 100% to the survivor, on the minimum ₹8 lakh. At an assumed 6.6% that pays ₹52,800 a year (₹4,400 a month). See annuity options.
Step 2: Build the buckets
| Bucket | Money | Purpose | Expected income (illustrative) |
|---|---|---|---|
| Emergency and 1-year spending | ₹10 lakh in savings and short deposits | Medical shocks, house repairs | Small interest |
| SCSS (Suresh) | ₹30 lakh at 8.2% for 5 years | Quarterly income | ₹2,46,000 a year |
| Joint-life annuity | ₹8 lakh | Lifetime floor for both | ₹52,800 a year |
| EPS pension | — | Lifetime floor (reduced family pension after his death) | ₹54,000 a year |
| Reserve | ₹62 lakh | Inflation protection; later SCSS for Lata | Withdrawals as needed |
Total money: ₹60 + ₹32 + ₹10 = ₹102 lakh outside the annuity, plus ₹8 lakh in the annuity.
Step 3: Add up income and the gap
- SCSS ₹2,46,000 + annuity ₹52,800 + EPS ₹54,000 = ₹3,52,800 a year (₹29,400 a month).
- Spending ₹6,60,000 − ₹3,52,800 = ₹3,07,200 a year to come from the reserve.
- ₹3,07,200 ÷ ₹62 lakh = about 5.0% in year 1.
A 5% starting withdrawal that rises with inflation is aggressive for a retirement that may last 30 years. The plan works only if the reserve earns well above inflation or spending falls later.
Step 4: Improve the plan
| Change | Effect (illustrative) |
|---|---|
| Open SCSS for Lata at 60 (₹30 lakh moved from the reserve) | Adds ₹2,46,000 a year at 8.2%, but the reserve falls to ₹32 lakh |
| Buy a second annuity at 65 or 70 | Higher rates for older ages; adds to the floor |
| Cut spending by ₹5,000 a month | Gap falls by ₹60,000 a year, withdrawal rate to about 4% |
| Suresh works part-time for 3 years | Delays reserve withdrawals and lets it grow |
| Rent out part of the house | Adds income without selling assets |
With Lata's SCSS from age 60, guaranteed and interest income rises to about ₹5,98,800 a year, leaving a gap of only ₹61,200 against a reserve of ₹32 lakh (under 2%), at least for the first five years. The catch is that SCSS rates on renewal are not known in advance, and spending will rise with inflation.
Step 5: Plan for years 6 onwards
SCSS matures after five years and can be extended by three years at the rate then applicable. Meanwhile, at 6% inflation, ₹55,000 of spending becomes about ₹73,600 a month after five years (₹55,000 × 1.06⁵). The reserve must cover that rise, which is why it should not be kept entirely in low-yield savings. Many retirees keep part of it in conservative debt and hybrid investments with a planned withdrawal, but the right mix depends on risk tolerance and should be discussed with a fee-only adviser.
Things the plan must not forget
- Health insurance: premiums rise with age and are often the fastest-growing expense.
- Tax: SCSS interest and annuity income are taxable; tax reduces the net income. The EPS rules guide notes that EPS also has no inflation indexation.
- Nominations: SCSS, annuity, bank accounts and investments should have nominees, and Lata should know where everything is.
- Family pension: after Suresh's death, Lata receives the EPS widow pension and the full annuity under the joint-life option. Check what the EPS widow pension amount would be.
Use the annuity pension calculator to add up guaranteed income (put EPS in the "other pension" box), and see the retirement corpus guide for how big the reserve should be. Rules for SCSS and PPF are in PPF, SCSS and PMVVY for retirees.
Frequently asked questions
Should I put all my retirement money in SCSS?
You cannot: the limit is ₹30 lakh per person. SCSS also offers no growth, and its interest is taxable.
Is it better to buy a larger annuity?
A larger annuity gives more certainty but less flexibility and no inflation protection. Many retirees annuitise in stages.
What withdrawal rate is safe?
There is no guaranteed safe rate. Planners often use about 3.5–4% of the reserve as a starting point for long retirements, and review every year.
Can EPF stay invested after retirement?
EPF is meant to be claimed after retirement. Accounts can become inoperative after retirement age and stop earning interest, so plan to withdraw and redeploy it.
Official sources
- National Savings Institute — SCSS rules and current rates
- PFRDA — NPS exit and annuity rules
- IRDAI — annuity and health insurance regulation
- SEBI — registered investment advisers
