NPS vs APY: Which is best pension scheme to accumulate money; check experts' view

NPS vs APY: National Pension Scheme (NPS) and Atal Pension Yojana (APY) both are pension schemes and hence it becomes important for an investor to know, which one is best pension scheme to invest in so that they can get maximum returns on their money. According to tax and investment experts, both are great products. While one is market linked, the other is not. They are of the opinion that investors should invest in both pension schemes for this very reason.

Speaking on the APY, Kartik Jhaveri, Director — Wealth Management at Transcend Consultants said, "In APY scheme, one can start investing from 18 years to 40 years and can fix pension from Rs 1,000 to Rs 5,000. As per the APY chart, if someone starts investing in it from 18 years for Rs 5,000 monthly pension, the APY chart suggests that the monthly APY premium will be Rs 210. So, by investing Rs 7 per day, one an get Rs 60,000 annual pension." He said that APY pension scheme is apt for those who fall in the low income group and they can't afford the market uncertainty as we are witnessing these days. Investment in APY pension scheme is income tax exempted under Section 80C provided the investor produces its investment receipt.

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Speaking on the NPS pension scheme; Manikaran Singhal, a SEBI registered tax and investment expert said, "NPS pension scheme was initially for the central government employees only but from 2009 onward, it became available for all kinds of investors. In this scheme, an earning individual can invest from 18 to 60 years. Investment in NPS scheme up to Rs 50,000 in a financial year is tax exempted under Section 80CCE and it's beyond the Rs 1.5 lakh tax exemption limit under Section 80C of the income tax act. So, a salaried person should go for both options as both pension saving schemes are tax-saving investment options." 

Manikaran said that in NPS, which is an annuity plan, investors money is linked with the market and hence, it's for those investors only who can tolerate mild risk appetite. NPS accounts are classified in two modes — active mode and auto mode. One is a debt option while the other is market linked. He said that those who are ready to take market risk can choose the 50:50 option in active and auto mode provided their investment is for the long-term. At the time of maturity, they can expect to get around 9.5 per cent returns on money accumulated during the investment period.