Atal Pension Yojana Vs National Pension System: Things to know before opening APY or NPS account

While National Pension System is a defined contribution pension plan, the Atal Pension Yojana is a defined benefit pension plan.

APY Vs NPS, opening APY or NPS account, Guaranteed pension, minimum pension, subscriber, returns
Both APY and NPS are regulated by PFRDA as far as its rules and guidelines are concerned.

Atal Pension Yojana (APY) and National Pension System (NPS) are the two pension plans many of us invest in to save towards retirement. What makes them a true-to-label pension plan is the provision of lifetime annuity after opening an APY or NPS account. Both NPS and APY are deferred pension plans, which means one needs to keep saving for a specific tenure before getting a regular pension. Further, both APY and NPS are regulated by PFRDA as far as its rules and guidelines are concerned.

However, there are several differences between APY and NPS, and as an investor you need to know them before starting to invest in them.

Defined benefits

While NPS is a defined contribution pension plan, the APY is a defined benefit pension plan. Guaranteed minimum pension is known from day one of opening the account. NPS is a voluntary, defined contribution retirement savings scheme and is different from APY. In NPS, neither the growth is assured nor the pension amount. The contributions are invested in equities or debt or a mix of both. NPS is a market-linked pension plan in which the amount of pension is determined by the amount one saves.

Guaranteed pension

In APY, the pension is guaranteed and is known to the subscriber from the day one opens the APY account. Under the APY, guaranteed minimum pension of Rs.1,000, Rs.2,000, Rs.3,000, Rs.4,000 and Rs.5,000 per month will be given at the age of 60 years depending on the contributions by the subscribers. In NPS, based on the corpus accumulated on maturity and the prevailing annuity rates at that time, the pension amount is fixed for the NPS subscriber. Using the NPS pension calculator helps in getting an approximate figure to what one can expect to get as a pension by saving a certain amount in NPS.


The returns in APY is around 8 per cent and is fixed for the APY subscriber, however, returns in NPS are linked to the performance of the underlying assets such as equity and debt. Atal Pension Yojana offers a guaranteed rate of 8 per cent assured return for the subscribers and also the opportunity of higher earnings in case the rate of return is higher than 8 per cent at the time of maturity.

Maximum pension

In the case of APY, there is a fixed pension amount depending on the amount you save on a regular basis. APY returns are assured and fixed but it comes with an investment cap and also has a cap on the pension amount. In NPS, the pension amount will depend on the amount used to buy annuity from the life insurance company.

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