Find your suitable insurance plan
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5 min read
Updated on Apr 27, 2023
Retirement is a phase in life when people normally do not work as actively as during their working years. Hence, the monthly income that is received is also not that regular or stable like in the case of salary received from jobs. But when it comes to expenses, they remain more or less similar even after retirement, especially with increased healthcare costs etc. Hence, you definitely need a regular flow of money coming in to lead a normal life after you are retired. And if you do not plan it in your young age when you are earning well, you may have to spend your retired life amidst all sorts of worries rather than spending some relaxed time.
Let us compare the difference between NPS and Atal Pension Yojana in this post to understand the policies so that you can plan your retirement accordingly.
NPS is a retirement scheme launched by the government of India where an individual can invest until the age of 65 years. It is a policy offering market-linked benefits to the policyholder depending on the financial market. NPS allows the investor to choose from four types of funds where the policyholder can invest. Once the policy matures, the policyholder can withdraw 60% of the accumulated amount as lump sum, while the remaining 40% can be received as annuities for the rest of his/her life.
Read More: A Beginner’s Guide to Retirement Pension Plans in India
The APY full form is Atal Pension Yojana, which is another retirement policy being launched by the government of India. This is another guaranteed pension plan that serves the people of the low income group in the unorganized sector. The policyholder under the APY scheme can invest in the policy until he/she turns 40 years. However, the maturity of the policy is reached at 60 years of the policyholder.
There are five different choices of corpus that are guaranteed under the scheme ranging between INR 1000 to INR 5000. Hence, under the APY scheme the policyholders can invest the amount as per their requirement. The policyholder has to take into account various aspects such as age of the policyholder, pension amount expected and the frequency of contribution to calculate the corpus benefit to be received under the scheme. Once the policy matures, the pension amount is paid to the policyholder and his/her spouse for the rest of their life. Further, the policyholder also gets the benefit of Atal Pension Yojana income tax deduction under this plan.
The table below shows a comparison to indicate the key difference between the Atal Pension Yojana vs. NPS:
| Criteria | APY | NPS |
| Entry age | The entry age for APY is minimum 18 years and maximum 40 years | The NPS has an entry age of minimum 18 years and the maximum 65 years |
| Eligibility | Any Indian resident can subscribe to APY | All Indian citizens including resident and non-resident can apply for NPS |
| Account Type | APY is a single scheme with no different account types | The NPS offer two types of account – Tier- I and Tier-II |
| Nominee Option | It is mandatory to nominate someone as nominee while opening the APY account | Here also nomination is mandatory and anyone except the spouse can be the nominee |
| Pension Slab | The policyholder can choose from the fixed pension slab to receive every month such as INR 2,000, 3,000, 4,000 or INR 5,000 | Here, no fixed pension slabs are mentioned as the returns are market-linked |
| Guaranteed Returns | The APY allow guaranteed pension post-retirement | NPS does not guarantee any returns as the policy is linked to market variables |
| Premature Withdrawal Facility | No premature withdrawal is possible till the policy term ends. Only if any medical emergency or demise of the subscriber takes place, it is allowed | The NPS Tier-II account allows premature withdrawal, whereas the Tier-I account has restrictions in terms of premature withdrawal subject to terms and conditions of the policy |
| Choice of Investment | The APY does not allow any investment choice to the subscribers | Under NPS, the subscriber receives two choices such as active or auto, which he/she can choose to manage funds |
| Account Number | Under the APY scheme, the government does not allocate any permanent account number | Under the NPS, a Permanent Retirement Account Number (PRAN) is given to the subscriber of the account |
| Government Contribution | Depending on terms and conditions, the government does a contribution to the APY subscribers account | The NPS account receive no contribution from government’s side |
Also Read: Best Retirement Plans 2022-23 for Senior Citizens
You have seen the differences between Atal Pension Yojana and NPS. Let us now take a look at the similarities of the two policies below:
Know More: How To Apply Online for Atal Pension Yojana?
To Sum Up
It is very important to invest during your working years to lead a stress-free retired life. Irrespective of whichever policy you choose the main aim of the plan, which is offering a good life after retirement to the individual, should be fulfilled. In that regard, both Atal Pension Yojana and the National Pension Scheme allow financial security for individuals after retirement. The policyholders can use an NPS calculator to calculate the sum of money that they need to invest to get the desired returns.
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No. You do not require to have one account to apply for the other. In fact, anyone can individually apply for both APY and NPS schemes to benefit from them separately. However, you cannot buy two policies of the same scheme under your name.
Yes. it is possible for an eligible Indian citizen to apply for both NPS and APY schemes individually.
Your PRAN details are required for the National Pension Scheme (NPS) to know the contribution amount and related details. However, the Atal Pension Yojana (APY) status can be checked via SMS or by visiting the closest branch of the post office or bank where you have applied for the account.
Yes, both NPS and APY schemes allow tax benefits of up to Rs 1.5 lakhs under section 80 CCD (1) of the Income Tax Act.
Yes. In case of the untimely death of the policyholder of both the accounts, the beneficiary can claim the death benefit. In case there is no nominee mentioned in the plan, the family of the policyholder can claim the amount.
PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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