Kolkata: Pension in PPF: Public Provident Fund, or PPF, is one of the most popular guaranteed-return instruments that have survived the transition of the country from a controlled economy to a market-driven one. It also has a provision by which one can use it like a source of pension. But very few subscribers are actually aware of the fact that PPF can be used as a source of pension-like income. The advantage of PPF is that anyone — whether working or not working — can open a PPF account. Therefore, anyone who can open a PPF can take the benefit of a pension-like regular income from the account once he/she builds a sizeable corpus in it. PPF currently offers a rate of interest of 7.1%. The lock-in period in PPF is 15 years but even after the expiry of this period, an investor can keep extending the investment by multiples of five years. In other words, one can invest for 20, 25, 30, 35 or even 40 years and beyond in PPF. Thus a big corpus can be built and in utmost safety since PPF carries sovereign guarantee.
How much corpus in PPF in 30 years?
A contributor can invest a maximum of Rs 1.5 lakh in PPF account every year. Considering one begins investing at the age of 30 and invest the same amount every year till he/she reaches 60, the total amount will be Rs 1,54,50,911 or 1.54 crore. It is assumed that the rate of interest remains at 7.1% throughout this period, during which the out-of-pocket investment amounts to Rs 45 lakh and the interest works out to Rs 1,09,50,911, or Rs 1.09 crore.
The “pension” calculation from PPF
Now we know that PPF pays 7.1% interest annually. Considering one has Rs 1,54,50,911 in the PPF account, it will generate Rs 1,097,014 in the 31st year. PPF has a provision, whereby one can withdraw from the account once every year. Therefore, one can draw this entire amount (or Rs 1,097,014) fromm the PPF in the 31st year. This works out to be Rs 91,417 per month. The amount in the PPF account does n’t go down even if this withdrawal is made. Thus, every year one can take out this moey which acts like a big pension every month.
One can try this moethod ant time after the 15th year but one should build a good amount in the account so that the pension amount is significant.