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Difference Between Atal Pension Yojana and NPS

10 Mins 04 Aug 2023 0 COMMENT

Growing old is the ultimate truth of life; no one can hide from it or postpone it. With old age, your earning capacity declines, and the need for money increases. In this scenario, retirement planning is essential for everyone to ensure a financially secure future.

When choosing the best government-backed programme, uncertainty may arise. Two such programmes with the goal of giving people pension benefits are the National Pension System (NPS) and Atal Pension Yojana (APY). Despite the fact that both programmes are aimed at retirement planning, they differ significantly in terms of eligibility, contribution, benefits, and other factors. To assist you in determining which plan best meets your retirement needs, we will review and discuss the difference between APY and NPS in this article.

An Overview: APY and NPS

NPS (National Pension Scheme)

In 2004, the Indian government introduced the National Pension Scheme (NPS), a retirement savings programme with a defined contribution component. Indians between the ages of 18 and 65 are eligible to participate in the plan, which is governed by the Pension Fund Regulatory and Development Authority (PFRDA).

Subscribers to the NPS have the opportunity to routinely make contributions to their retirement accounts and build up savings over time. Depending on the subscriber’s choice of investment, the contributions are invested in a mix of stocks, bonds issued by the government, and corporate debt. The programme offers a variety of investing possibilities, from low-risk fixed-income instruments to high-risk equities funds.

When subscribers retire, they can take out a portion of the corpus in a lump payment and invest the balance in an annuity that will pay them a regular pension for the rest of their lives. Alternatively, participants can postpone buying an annuity plan and withdraw the corpus over time.

APY (Atal Pension Yojana)

The Atal Pension Yojana (APY), a government-backed pension programme, was introduced in 2015 to give guaranteed pensions to Indian residents, particularly those working in the unorganized sector. The Pension Fund Regulatory and Development Authority (PFRDA), which oversees the programme, offers a set pension that ranges from Rs. 1,000 to Rs. 5,000 each month, based on the subscriber’s contribution and the age at which they begin contributing. With a minimum 20-year contribution period, the programme is available to all Indian nationals between the ages of 18 and 40.

After 60 years of age, subscribers get a lump sum payment or a pension, depending on their preference, from the scheme’s investment of the contributions they have made in a combination of debt and equity instruments. APY is a valuable retirement programme for people who want to guarantee their financial future but cannot access official pension plans.



 Atal Pension Yojana

National Pension Scheme


Open to all Indian nationals between the ages of 18 and 40 without a pension plan

Open to all Indian nationals between the ages 18 to 55 as well as NRIs

Investment Options

Fixed pension scheme using a combination of debt and equity securities as investments

A market-linked plan offering three asset classes: Asset Class E (Equity), Asset Class G (Government Securities)

& Asset Class C (Corporate Bonds)

Contribution Period

20 Years

Minimum 10 years, with the option to continue until age 60


The government guarantees a pension after retirement.

Market-linked returns that are based on how well the selected investment performs

Maximum Contribution

Rs 5000/Month

No Limit

Pension Amount

Fixed pension payments of between Rs 1,000 and Rs 5,000 monthly.

Pension amounts are based on contributions paid and investment returns.


According to APY guidelines, early withdrawal is only permitted in certain circumstances. The invested sum and any interest will be transferred to the investor’s or nominee’s account in the event of the subscriber’s death or critical illness respectively. Only if the subscriber leaves for another reason could they recover their investment, and they would forfeit any interest accrued during this time.

The National Pension Scheme only permits Tier II accounts to make premature withdrawals. There are limitations that apply to Tier 1 accounts. This account may only be withdrawn from the beginning of the third year of investment. Other restrictions on these withdrawals include events like weddings, property purchases, and other particular circumstances like a medical emergency.


While Tier I accounts allow partial withdrawals of funds up to a maximum of 25% of the account balance. A lump sum withdrawal of 20% of the accruing corpus is permitted in the event that a scheme is prematurely closed by an individual. Retaining the remaining 80% of the corpus for annuities would be necessary.

Account Number

Subscribers do not get a permanent retired account number

Subscribers get a permanent retirement account number

Government Contribution

The government offers a certain sum subject to terms and conditions

There is no government contribution


Nominee is mandatory, and anyone can be one. 

A nominee is mandatory, and it must not be the spouse

Final Word

In conclusion, anyone looking for a safe retirement plan should consider both the Atal Pension Yojana and the National Pension Scheme. Whereas NPS offers market-linked returns with higher risks, APY is a set pension plan with low risk. Prior to selecting the plan that meets your retirement objectives, it is essential that you do an in-depth study on both programmes and speak with a financial planner.

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