Saving for your old age is of utmost importance. The government of India has launched multiple schemes to help people save up for their retirement. Here, we will look at two such schemes, the APY and the NPS.
APY stands for Atal Pension Yojana and NPS stands for National Pension System. Both of these are retirement schemes launched by the government of India. While APY is a pension scheme, NPS is a voluntary retirement savings scheme.
Let’s look at each of them in detail.
The Atal Pension Yojana was launched by the government of India in 2015. It is meant to offer security to people who have a low income and do not have access to formal pension schemes.
Here are some details about the scheme -
People ranging from ages 18 to 40 who hold a bank account are eligible
It is meant to protect people from the unorganized sector from illness, accidents, etc.
Contributions are managed by the PFRDA or Pension Fund Regulatory and Development Authority
You can invest depending on the amount of pension you want to receive after retirement
A monthly pension is provided to people over the age of 60
There are 5 pension options available under this scheme, ranging from Rs.1,000 to Rs.5,000
The government co-contributes 50% of the money that the subscriber contributes. This is eligible for people who subscribed to the scheme before 31st December 2021
The National Pension System was launched by the government of India in 2004. It is a voluntary long-term investment scheme that is available to employees from the public, private, and unorganized sectors.
Here are some more details about the scheme -
Persons between the ages of 18 and 65 can enroll in this scheme
It is a voluntary long-term savings scheme
The PFRDA or Pension Fund Regulatory and Development Authority regulates the scheme
The National Pension System Trust or the NPST owns all assets under the NPS
Your contributions get invested in a mix of government securities, fixed income, and equity, depending on your risk profile and age
It provides people with low-risk tolerance with a chance to invest in a safe instrument
You can open a Tier-1 or a Tier-2 savings account
Tier-1 accounts have an extended lock-in period that offers tax benefits
Tier-2 accounts have no lock-in period, are voluntary, and offer no tax benefits
You are required to invest in your pension account while you are employed
A share of the corpus can be taken by you after you retire, while you will receive the remaining sum as a monthly pension
Let us now take a look at some of the differences between the Atal Pension Yojana vs NPS -
| Criteria | APY | NPS |
|---|---|---|
|
Age |
For people from ages 18 to 40 |
For people from ages 18 to 65 |
|
Eligibility |
Only resident Indians |
Both resident and non-resident Indians |
|
Types of Accounts |
Only one type of account can be opened |
Two types of accounts can be opened, Tier-1 and Tier-2 |
|
Guaranteed Pension |
Yes |
No |
|
Tax Benefits |
Yes |
Yes |
|
Premature Withdrawals |
No |
Yes, but only for Tier-2 accounts |
|
Freedom to Choose Where to Invest |
No |
Yes |
|
Government Contribution |
Yes, but for accounts opened before 31st December, 2021 |
No |
Even though APY and NPS have major differences, they have similarities. They are as follows -
They are both regulated by PFRDA or Pension Fund Regulatory and Development Authority
Both schemes aim to encourage people to save money for their retirement
The pension received from both is taxable
The government of India launched the Atal Pension Yojana and National Pension System so that people can save funds for their retirement age. Both these schemes let you save money during your working years so that you are financially secure after you have retired or attained old age.
If you are looking for a higher corpus amount and don’t mind certain risks, you can invest money in the NPS. But if you prefer receiving a sure pension between Rs.1,000 to Rs.5,000 without any risks involved, the APY will be a better choice for you.
At the end of the day, which scheme you choose to invest in depends on your personal preference. Opening an account in both schemes is equally easy, and doesn’t involve any hassles.
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Yes, you can have both APY and NPS accounts.
You can invest up to Rs.2 Lakh in the NPS Tier-1 account.
Yes, you can invest both as lumpsum and SIP in the NPS account.
Yes, salaried people can invest in NPS.
The PPF is completely government-backed and thus there are fewer risks involved, but you get lower returns. On the other hand, NPS gives better returns. In the end, which is better, depends on personal preferences and situations.
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