NPS vs APY: The government offers two popular pension schemes National Pension System (NPS) and Atal Pension Yojana (APY).
NPS vs APY: Retirement is that stage of life which is completely different from our working and earning life. For many people, retirement means that they no longer have the ability to earn. In this sense, people start planning their retirement years in advance so that they can live their retirement days comfortably. There are many ways to save for retirement. A retired person generally does not want to take financial risk and prefers guaranteed returns.
The government has two popular pension plans – National Pension System (NPS) and Atal Pension Yojana (APY). Both the schemes are regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and the contribution in both the schemes is tax-deductible under section 80CCD(1) up to a maximum of Rs 1.5 lakh. One can choose any one on the basis of his/her choice.
National Pension Scheme
National Pension Scheme (NPS) is a retirement cum investment scheme of the government. Through this scheme, any person can make a large corpus for himself. Employees working in the government except the Armed Forces staff, private, public and unorganized sectors can subscribe to this scheme. After the age of 60, one can withdraw 60 per cent of the invested amount. The remaining 40% is used to provide annuity to the customer.
Atal Pension Yojana
Atal Pension Yojana (APY) is a government-sponsored social security scheme, which was launched in 2015. All bank account holders can join this scheme, which offers a minimum pension of Rs 1,000 and a maximum of Rs 5,000 per month. It offers guaranteed pension after 60 years of age.
NPS and APY: Difference between the two
Despite some similarities, NPS and APY are somewhat different from each other. Some of the major differences between these two are:
Age Limit: The minimum age of entry in NPS is 18 years while the maximum is 70 years. At the same time, the minimum age of entry in Atal Pension Yojana is 18 years and maximum is 40 years.
Eligibility: NPS allows investors who are citizens of India as well as NRIs to invest in this scheme. On the other hand, Atal Pension Yojana is open to resident Indian citizens only.
Guaranteed Returns: While NPS does not guarantee pension after retirement, APY offers lifelong pension to the subscriber, triple benefit of lifelong pension to the spouse after the death of the subscriber. Further, after the death of both of them, the entire amount is returned to the nominee.
Partial Withdrawal: For partial withdrawal, there are certain specific conditions to be fulfilled in NPS. You can withdraw maximum 20% of the corpus before the age of 60 years.
Under Atal Pension Yojana, you will not be allowed to withdraw the invested money before the end of the period. Early withdrawal of earned balance is possible only in case of death, or critical illness of the investor.
Risk Factor: In the APY scheme, the contribution is allocated in a specific manner only in the government securities. On the other hand, the funds invested in NPS are invested in four types of funds: Ultra-Safe, Conservative, Balanced and Aggressive. It is invested in equities and bonds. The investor can decide on the fund according to his risk appetite.
Maturity Withdrawal: APY offers guaranteed pension after 60 years of age. Whereas, in case of NPS, it is necessary that 40% of the maturity amount be invested in the annuity.
