NPS vs APY: There are two special pension schemes of the government – Atal Pension Yojana (APY) and National Pension System (NPS) for regular income after retirement. According to your eligibility for retirement, you can manage regular income for your old age by investing in any of these options. Both these schemes are regulated under the rules and guidelines of PFRDA. Apart from this, both these schemes are deferred pension plans i.e. under this one has to invest for a certain time to get regular pension. Which of these two schemes is better for one’s old age, its decision can be taken by understanding the difference between the two.
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NPS vs APY
- Age to join the scheme: One can start investing under NPS between 18-55 years while under APY one can start only between 18-40 years i.e. cannot plan for retirement after the age of 40 years under APY.
- Who can invest: NRIs including citizens residing in India can also invest under NPS, whereas only citizens residing in India can invest under APY.
- Pension Guarantee: There is no guarantee of how much pension you will get after retirement under NPS and it depends on the amount used to buy annuity whereas under APY the minimum pension after retirement is (1 thousand, 2 thousand, three thousand, four thousand or Five thousand rupees) is available.
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- Return: The money of NPS is invested in debt or equity or both, due to which how much return will be given from it, it will depend on the movement of the market. In contrast, the APY has a fixed return of around 8 per cent and can be even higher.
- Tax Benefits: Under NPS, one can avail tax benefit of up to Rs 2 lakh whereas contributions made under APY do not get any such benefit.
- types of accounts: Two types of accounts can be opened under NPS – Tier 1 and Tier 2. In contrast, only one type of account can be opened under APY.
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- Withdrawals before maturity: Withdrawals under NPS can be made only from Tier-2 account before maturity. In contrast, under APY, premature withdrawal is allowed only on the basis of the investor’s untimely death or the investor’s medical condition.
- Investment options: Under NPS, the investor gets an opportunity to choose the option to invest his money whereas under APY there is no such option.
- Government Contribution: The government does not make any contribution under NPS and the entire contribution belongs to the investor only. In contrast, as much as the investor contributes to the APY, the government also contributes the same amount.
(Input: bankbazar.com)
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