NPS Vs APY

Updated on 24 Oct, 2023

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What is the National Pension Scheme (NPS)?

National Pension Scheme (NPS) is a long-term investment plan started by the Central Government. It falls under the purview of the Pension Fund Regulatory and Development Authority (PFRDA) and is open to employees from the public, private sectors along with the employees in the unorganized sector.

As a part of the scheme, it requires the investors to invest in a pension account during the course of their employment. Post-retirement, the employees can take a certain portion of the corpus. As for the balance amount, it will be provided to the employee as a monthly pension. It allows the people who have a low-risk appetite an opportunity to invest in a safe instrument. This can have a changing impact on the lives of people post retirement.

What is Atal Pension Yojana (APY)?

Atal Pension Yojana came into force in order to provide a pension scheme to the unorganized sector. The major objective of the scheme is to provide Indian citizens with a security blanket from illness, accidents, etc. As per the current regulations, the amount collected under the pension scheme is to be managed by the Pension Fund Regulatory Authority of India.

The scheme allows an option of getting a fixed pension of Rs. 1000, Rs. 2000, Rs. 3000, Rs. 4000, Rs. 5000 on attaining the age of 60. This will be determined on the basis of an individual’s age and the contribution made by them. In order to avail of the benefits of the pension scheme, the below conditions must be met:

Individual must be a citizen of India
The age of the individual must be between 18-40
The individual should have made contributions for a minimum period of 20 years
The bank account of the individual should be linked to the aadhar.

Central Government will co-contribute 50% of the total yearly contribution or Rs. 1000 /- per annum, whichever is lower, for the period of 5 Years in the account of subscribers who join the scheme up to 31st December 2015 and who are not a member of any Statutory Social Scheme and not an Income taxpayer. Subscribers who are joining the APY scheme at an early stage of age would be required to pay a lesser monthly subscription amount as compared to the subscriber joining at a later age.

Difference Between NPS vs APY

Particulars	National Pension Scheme	Atal Pension Yojana
Eligibility	Indian citizens, as well as non-resident Indians, can invest in the scheme.	It allows only the residents of India to invest in the scheme.
Age limit	Subscribers of the scheme should be of minimum 18 years of age and a maximum of 55 years of age.	The scheme has an entry age of 18 years and maximum age of 40 years.
Pension	NPS does not provide any guarantee of pension post-retirement.	Atal Pension Yojana provides a guaranteed pension facility post-retirement.
Types of account	NPS has two types of accounts, Tier 1 and Tier 2.	The scheme provides for investment only in one account.
Support from the government	The government makes no contribution towards the national pension scheme. The investments have to be made by the subscribers only.	The government provides some monetary support to the investors.
Premature Withdrawal	The premature withdrawal is allowed only in tier 2 accounts.	Atal Pension Yojana does not provide an option of premature withdrawal.

Read also the Difference between NPS and SIP

Which is better NPS vs APY?

With the objective of providing pensions to the citizens of India, both schemes differ in terms of pension return methods. Let us discuss the difference between NPS vs APY in-detail below:

Returns under Atal Pension Yojana (APY):

Atal Pension Yojana came into force in order to provide a pension scheme to the unorganized sector. The scheme allows an option of getting a fixed pension of Rs. 1000, Rs. 2000, Rs. 3000, Rs. 4000, Rs. 5000 on attaining the age of 60. This will be determined on the basis of an individual’s age and the contribution made by them.

Age of entry	Years of Contribution	Monthly Pension of Rs. 1000	Monthly Pension of Rs. 2000	Monthly Pension of Rs. 3000	Monthly Pension of Rs. 4000	Monthly Pension of Rs. 5000
18	42	42	84	126	168	210
19	41	46	92	138	183	228
20	40	50	100	150	198	248
21	39	54	108	162	215	269
22	38	59	117	177	234	292
23	37	64	127	192	254	318
24	36	70	139	208	277	346
25	35	76	151	226	301	376
26	34	82	164	246	327	409
27	33	90	178	268	356	446
28	32	97	194	292	388	485
29	31	106	212	318	423	529
30	30	116	231	347	462	577
31	29	126	252	379	504	630
32	28	138	276	414	551	689
33	27	151	302	453	602	752
34	26	165	330	495	659	824
35	25	181	362	543	722	902
36	24	198	396	594	792	990
37	23	218	436	654	870	1087
38	22	240	480	720	957	1196
39	21	264	528	792	1054	1318
40	20	291	582	873	1164	1454

Returns under the National Pension Scheme (NPS):

The returns under the NPS are dependent on the current market conditions. The fund house arrives at the returns on the basis of the net asset value. Furthermore, the returns also depend on the type of investment opted by the subscriber. An equity portfolio might generate a better return as compared to a conservative portfolio. You can also use Scripbox’s NPS calculator and estimate the maturity value. Below are the returns generated by the various portfolio mix under the NPS:

Type of subscriber	Portfolio Mix	Average Returns
Aggressive Subscriber	20% investment in gilt funds30% Corporate bonds50% Equity Funds	6 months – 8.31%1 year – 16.48%3 years – 9.49%5 years – 12.61%
Balanced Subscriber	33.3% Gilt Funds33.3% Corporate Bonds33.3% Equity Funds	6 months – 6.71%1 year – 11.49%3 years – 9.74%5 years – 11.75%
Conservative Subscriber	50% Gilt Funds30% Corporate Bonds20% Equity Funds	6 months – 5.36%1 year – 7.17%3 years – 9.93%5 years – 11.04%

Thus, in conclusion, the investors who are looking to take the advantage of market conditions should invest in NPS. It is to be noted that the return would be calculated based on the prevalent market conditions and will not be fixed. However, if the investors are looking for a safe fixed return within a predefined range, they can consider investing in Atal Pension Yojana. This article will help you understand the difference between NPS vs APY in detail to take an informed decision.