Retirement is considered to be a phase in life wherein an individual does not work actively nor has a regular monthly source of income.
Retirement is all about
spending time in relaxation; however, a steady flow of income is important to lead a stress-free retirement life to meet the everyday expenses. Therefore, it becomes important to create a retirement corpus while the individual is actively working to lead a financially independent life.

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The created retirement corpus would help to meet the post-retirement expenses. When it comes to retirement planning there are various types of investment avenues. The Indian government has introduced two such avenues namely the NPS and APY. 

This article focuses upon both of these avenues and the comparative similarities and differences respectively.

Overview: NPS and APY

The National Pension Scheme is one retirement planning scheme that offers market-linked returns. An individual can invest in the NPS until 65 years of age. Within the NPS are the four types of funds and investment strategies remain two. The individual can invest in any of the four funds available within the active or auto strategy choice. The returns largely depend upon the financial market. Upon maturity, 60% of the corpus accumulated can be withdrawn in the lump sum and the remaining 40% will be paid as annuities throughout life.

On the other hand, the Atal Pension Yojana is one retirement scheme that was introduced by the Indian government to provide guaranteed pension to low-income unorganized sector individuals. An individual can invest in the Atal Pension Yojana until the age of 40 years. The APY scheme matures when the individual reaches 60 years of age. There are five alternatives of pension sum that is guaranteed within the scheme. The amount will range between Rs 1000 and Rs 5000. The individual who invests in the Atal Pension Yojana scheme can choose the pension amount as per the need. On the premise of the age, amount of pension and contribution frequency the sum that needs to be contributed is to be calculated towards the scheme. Upon maturity, the guaranteed pension sum is paid throughout the individual and the spouse lifetime.

Difference Between APY and NPS

Below is a comparative table that shows the key difference between the APY and NPS:


Atal Pension Yojana


Joining Age

The entry age for the Atal Pension Yojana is 18 years and the maximum age is 40 years

The NPS has an entry age of 18 years and the maximum is 65 years

Who Can Join

The Indian resident can easily subscribe to the Atal Pension Yojana

The NPS is open for all Indian citizens whether resident or non-resident

Type of Account

APY is a single scheme and does not offer any different types of account

The NPS has two types of account namely Tier- I and Tier-II


The nomination is a mandate wherein the subscriber needs to nominate a nominee while opening the APY account

The nomination is a mandate wherein the nominee has to be other than the spouse

Slab of Pension

Option to choose the fixed pension slab that is to be received each month for instance Rs 1000, Rs 2,000, Rs 3,000, Rs 4,000 and Rs 5,000

No fixed pension slabs as the returns are market-linked

Guaranteed Returns

The Atal Pension Yojana gives guaranteed pension post-retirement

This does not guarantee any returns as it is linked to capital markets

Premature Withdrawal

The premature withdrawal is not possible until the end of the term. Withdrawal of funds is only possible in case of any medical emergency or demise of the subscriber

The premature withdrawal is possible only within NPS Tier-II account. However, under the Tier-I account, the premature withdrawal is subject to the fulfilment of terms and conditions

Investment Choice

The Atal Pension Yojana does not offer its subscribers the choice of investment

The NPS subscriber has two options namely active or auto choice. The NPS subscriber can also choose the fund manager to manage the fund

Account Number

Within the Atal Pension Yojana, the government does not offer any permanent account number

A Permanent Retirement Account Number is given to the NPS subscriber

Government Contribution

The government contributes to the subscribers’ APY account subject to the terms and conditions

The government does not contribute any fund to the NPS account

Similarities between APY and NPS

When it comes to the APY and NPS, it has the following similarities:

  • The APY and NPS are managed by the PFRDA.
  • Both the APY and NPS are retirement oriented schemes that help to create a retirement wealth corpus.
  • Once both of the schemes mature, a fixed pension amount throughout the life span of the individual is received.
  • The contributions to both the APY and NPS qualifies for deduction within Section 80CCD (1) to the maximum of Rs 1.5 lakh. The individual can claim an extra deduction within Section 80CCD (1B) on the contributions of up to Rs 50,000.
  • The pension sum received under both the APY and NPS is taxable at the existing tax prevailing laws.

Wrapping it Up

Making investments for stress-free retirement life is important. Regardless of whether an individual picks up APY or NPS, the scheme should fulfil the requirements to lead a good retired life.

Both the Atal Pension Yojana and the National Pension Scheme ensures financial security for retired life.

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Written By: PolicyBazaar - Updated: 30 August 2021
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