Atal Pension Yojana (APY) Vs National Pension System (NPS)

Both the schemes Atal Pension Yojana(APY) and National Pension System(NPS) are beneficial with lot of features with them. Choosing between the two will depend on individual preferences, financial goals and risk tolerance.

Comparison between Atal Pension Yojana (APY) and the National Pension System (NPS):

Feature	Atal Pension Yajna  (APY)	National Pension System (NPS)
Objective	Provide a fixed pension to workers in the unorganized sector upon retirement.	Provide a flexible pension system with market-linked returns for all citizens.
Eligibility	Indian citizens aged 18-40 years, primarily targeting workers in the unorganized sector.	Indian citizens and NRIs aged 18-65 years.
Contribution Period	Minimum of 20 years until the age of 60.	Until the age of 60, with an option to extend up to 70 years.
Pension Benefits	Fixed monthly pension of ₹1,000 to ₹5,000, depending on the contribution.	Market-linked returns with no fixed pension; can withdraw up to 60% as a lump sum, remaining 40% must be used to purchase an annuity.
Government Contribution	Government co-contributes 50% of the total contribution or ₹1,000 per annum (whichever is lower) for eligible subscribers for the first 5 years.	No direct government contribution, but tax benefits are provided.
Tax Benefits	Contributions qualify for tax deduction under Section 80CCD(1) of the Income Tax Act.	Contributions up to ₹1.5 lakh under Section 80C, and an additional ₹50,000 under Section 80CCD(1B) of the Income Tax Act.
Withdrawal Rules	Full corpus withdrawal allowed at 60 years; premature exit allowed only in cases of death or terminal illness.	Partial withdrawals allowed under specific conditions; full withdrawal allowed at 60, with 40% mandatory annuity purchase.
Investment Choice	No investment choice; government-managed.	Choice of investment funds and pension fund managers; options include equity, corporate debt, and government bonds.
Account Portability	No portability; specific to bank branches where the account is opened.	Fully portable across locations and jobs; can be managed online.
Administrative Charges	Minimal, as the scheme is government-managed.	Various charges by Pension Fund Managers, Central Recordkeeping Agency (CRA), and other intermediaries.
Risk Factor	Low, with a fixed pension guarantee.	Market-linked and thus subject to market risks, but with potentially higher returns.
Flexibility	Low, with fixed contributions and benefits.	High, with flexible contribution amounts and investment choices.

Key Differences:

Target Audience -

APY is targeted mainly at workers in the unorganized sector, whereas NPS is designed for all citizens including self-employed professionals and salaried individuals.

Pension Amount - 

APY offers a fixed pension amount, while NPS provides a pension based on the market performance of the invested funds.

Flexibility and Control -

NPS offers greater flexibility in terms of investment choices and contribution amounts, whereas APY has fixed contributions and benefits.

Government Contribution -

APY includes government co-contribution for eligible subscribers, while NPS does not, though it provides substantial tax benefits.