Pension is a source of income after retirement, and everyone wants their income to continue even after they stop working. To ensure this, there are several retirement schemes available. When it comes to retirement schemes, Atal Pension Yojana (APY) and National Pension System (NPS) are among the most popular options.
Both these schemes offer the benefit of a pension after retirement. However, they differ in many ways. In this article, we will help you understand which of these two schemes is best for you.
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National Pension System (NPS)
The National Pension System (NPS) was launched by the Government of India in 2004. It is a retirement scheme where the investor needs to contribute a fixed amount. This scheme is open only to Indian citizens, with an age limit of 18 to 55 years. The NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
In NPS, the investor’s money is invested in a retirement account. You can choose to invest in stocks, government bonds, or other financial instruments, making this a market-linked scheme. The returns you earn depend on the performance of your investments.
Key Features of NPS:
- NPS is a market-linked scheme.
- It offers three asset classes: equity, government securities, and corporate bonds.
- There is no maximum investment limit.
- The pension is based on the investor’s contribution and investment returns.
- The government does not contribute to the scheme.
- A nominee is mandatory in the scheme.
Atal Pension Yojana (APY)
Atal Pension Yojana (APY) was launched in 2015 by the government as part of its pension program. It is open to both Indian citizens and non-resident Indians (NRIs). APY is a guaranteed pension scheme, meaning it provides a fixed pension after retirement, based on the age at which you start investing and how much you invest.
Key Features of APY:
- APY is open to individuals aged between 18 and 40 years, and you must invest for at least 20 years.
- The scheme offers a guaranteed pension after retirement.
- You can invest a maximum of Rs 5,000 per month.
- The monthly pension ranges from Rs 1,000 to Rs 5,000, depending on your investment.
- APY does not provide a Permanent Retirement Account Number (PRAN).
- The government contributes a fixed amount based on the terms and conditions.
- A nominee is mandatory in the scheme.