Pension vs Lump Sum Calculator
Compare a guaranteed monthly pension with a lump sum offer using present value, break-even age and break-even return.
Quick answer
Pension present value is the sum of each monthly payment discounted at the return you expect on a lump sum. Compare it with the lump sum; the break-even return is the rate at which the two are equal.
Pension vs Lump Sum Calculator
Enter 0 for a flat pension.
The annual return you expect on the lump sum.
Your life expectancy assumption.
Present Value of Pension
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Lump Sum Offer
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Pension PV vs Lump Sum
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Pension Paid Over the Period
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Break-Even Age (Total Paid)
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Break-Even Age (Discounted)
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Break-Even Return
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Lump Sum Lasts, Paying Same Income
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Year-by-Year Comparison
| Age | Pension in year (₹) | Cumulative pension (₹) | PV of pension so far (₹) | Lump sum balance (₹) |
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Assumptions & method
- Pension payment in month k = monthly pension × (1 + COLA)^(whole years of payment completed). Payments are made at the end of each month.
- Monthly discount rate = (1 + annual rate)^(1/12) − 1. Present value = sum of each payment ÷ (1 + monthly rate)^k over the years you enter.
- Break-even age (total paid) is when cumulative pension payments reach the lump sum, ignoring interest. The discounted version uses present values.
- Break-even return is the annual rate at which the pension present value equals the lump sum over your chosen years.
- Lump sum drawdown: each month the balance earns the monthly rate, then the same pension amount (including COLA) is withdrawn. It is checked for up to 100 years.
- Taxes, survivor benefits, inflation (beyond COLA), provider risk and investment risk are not included.
Results are estimates based on the figures you enter. They are not guarantees and not financial advice.
Weighing a pension against a lump sum
A pension promises a stream of payments; a lump sum hands you the capital today. To compare them fairly, the calculator turns the pension into a present value by discounting each monthly payment at the return you could expect on the lump sum. It also shows the age at which the cumulative pension payments overtake the lump sum, the return at which the two are exactly equal, and how long the lump sum would last if you paid yourself the same income from it. These are estimates under steady assumptions, not a recommendation.