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😇NPS vs APY (Atal Pension Yojana) | Kisme banegi zyada PENSION? LLA NPS Ep#5 Financial Advice - YouTube
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Welcome to yet another episode
of Labour Law Advisor.
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My name is Mandeep.
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Today I will talk to you about the comparison
of NPS and APY (Atal Pension Yojna).
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A lot of people have been asking
questions like which is better, NPS or APY?
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Can we open an account in both?
Yes, you can.
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In fact, I was glad to know that all of you take
your retirement so seriously
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that you plan to invest in
two retirement schemes.
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A question came to my mind, Why?
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Why do you want to invest in two schemes when
a lot can come from investing in one scheme?
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Now you will say that we will receive
a pension from two sources.
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Double profit.
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So we will analyze whether it is more beneficial
to open an account in one of them or both.
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Let us move quickly towards comparison.
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If you are not following us on Instagram
then please do follow it.
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We post easy to understand infographics
of such complex schemes.
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We can see that you save those posts
so we know it is useful for you.
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So please check it out once.
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Here are our social media handles
and also given in the description below.
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[Intro music]
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So before comparing, we should have
basic knowledge of NPS & APY.
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In layman words, an NPS account can
be opened if you are 18-60 years of age.
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The minimum monthly contribution is Rs 500.
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The money that you invest monthly,
will be invested in 4 places,
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The stock market, Corporate Bonds,
Government bonds, Alternative Investments.
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You can control the % of your money
that goes into the equity/stock market
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what % goes into corporate bonds
and government bonds.
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As you age, your equity investment decreases
gradually so that your investment is not so risky.
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So this is a low-risk investment.
The average return you can earn is 8-10%.
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More than 10% if you
invested more in equity.
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After making contributions till you are 60, you can
withdraw up to 60% of your funds created in NPS.
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You have to take the Annuity
Plan for the rest 40%.
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This means that if you purchase an Annuity plan
from any insurance company
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and that would give you a monthly pension.
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Now if we talk about Atal Pension Yojna,
your age should be between 18-40.
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It is made for people of the
unorganized sector.
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As I said at the beginning of the video, to open
an account of APY, you should not have an EPF account.
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I was mistaken.
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I read the scheme document carefully, and
it is mentioned multiple times that
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“The scheme is focused on
the unorganized sector.”
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Once it is even said that “The member should
not have any social security scheme.
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But this was written for the government
contribution rule of 2015 which is not valid today.
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But this rule of 2015 is still mentioned in the
scheme document till today which was misleading.
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I was still misled when I went
to the bank to fill an APY form.
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As I wanted to make a video for you
on how to open an APY account.
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The banker asked me if I had
an EPF account or not.
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He wanted to tell me that EPF account
holders cannot open an APY.
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This means the bank is also misled.
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But I apologize from my side.
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Even if you have an EPF account, you
can open an APY account because
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its eligibility states that all bank
account holders can open an APY account.
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But does this mean that if you have an EPF
account, you should open an APY account?
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I will answer this very soon.
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Its contribution depends on
your age and pension plan.
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Lesser your age, the lesser the contribution
& the more the amount of your pension plan
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more your contribution.
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5 types of pension plans Rs 1,000, Rs 2,000,
Rs 3,000,Rs 4,000 or Rs 5,000.
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You can choose from the start that if you
contribute to the 5,000 pension plan,
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then upon retirement, you will get a
minimum pension of Rs 5,000 guaranteed.
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Similarly, on the 1,000 plan, you
will get a Rs 1,000 pension.
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First of all search for your age in this chart
For example, my age is 25.
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After that, I have to decide which
pension plan do I want to buy?
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This is the 5,000 pension plan. In this plan, at my
age, a monthly contribution of Rs 376 is received.
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Upon contributing Rs 376, I will get
a pension of Rs 5,000.
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Here the contribution is fixed according to the
chart but you can upgrade your plan.
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You can upgrade from a 2,000 plan to a
5,000 plan when your income is increased.
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You only get the chance to do
this once a year in April.
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Here is the form for that. It is also
given in the description below.
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How is this different from NPS?
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The difference is that in NPS you have the
option of 60% withdrawal
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but in APY you can only get the pension.
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Withdrawal is received only in
case of the death of the member.
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Even then the pension is available
to the spouse of the member.
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Upon the death of the spouse, the nominee
has the option to withdraw the complete corpus.
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Not the contribution corpus.
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It is predecided that if you have. For the Rs 5000
plan, then your nominee will receive Rs 8,50,000.
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Rs 6,50,000 on the Rs 4,000 plan.
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Rs 5,10,000 on the Rs 3,000 plan.
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Rs 1,70,000 on the Rs 1,000 plan.
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So now you have understood
these schemes.
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But before comparing and knowing
whether we should invest in both,
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I just want to tell you one thing that
after watching this video you should
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understand which scheme
we should not invest in.
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And the scheme which you want to invest
in, please watch the video dedicated to it.
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In those long videos, we discuss all the rules
regarding taxes, premature withdrawal, and more.
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So do not decide without
watching those videos.
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Now let us view the comparison chart.
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I have already told you
a lot of things such as,
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The eligibility age of NPS is 18-65
and that of APY is 18-40.
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In NPS you can make a
minimum of one transaction in a year.
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A minimum transaction of Rs 500
is to be made in a single.
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Your contribution to the APY depends
on your age as I explained to you before.
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Returns in NPS are 8-10% and returns do
not matter in APY as guaranteed pension is received.
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Lock-in will be at 60 years
of age for both schemes.
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Tax benefits are identical in both.
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You can get a deduction of Rs 1,50,000
in NPS and APY both.
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However, the maximum contribution for a
39-year-old in APY is Rs 1,318 for the 5,000 plan.
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From the Tax point of view, it is not a good investment
as the maximum withdrawal is only Rs 15,000.
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If we talk about Premature withdrawal
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In NPS after investing for 3 years,
You can withdraw 25% of your contribution.
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You can only withdraw an employee
contribution and not employer contribution.
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You can do this a total of only three
times every 5 years for specific reasons only.
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Similarly in APY, if you wish to prematurely
withdraw in case of death
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or critical illness by the nominee
if money is needed for treatment.
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If we talk about withdrawal, you can withdraw
a maximum of 60% in NPS but none in APY.
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Now I will explain it to you
with a practical calculation.
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Here I have opened the NPS calculator.
I have provided the link for this in the description.
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We will see calculations for both.
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First of all, I will but my Date
of Birth, 7 January 1995.
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If it is your birthday, wish them in the comments.
Now I will enter monthly contributions.
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Since we are comparing with
APY then I will enter that number.
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If I want a pension of Rs 5000 then
according to my age, I have to contribute Rs 376.
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Return and investment are 10% by
default and approximately 10% for NPS.
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But I will make it 9% just to be
on the safer side.
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I would like to purchase an Annuity for,
as I said maximum annuity will be 40%.
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But since you cannot withdraw anything
from APY I will increase this annuity to 100%.
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Assume I have invested Rs 376 on a 9% return
and I'm not withdrawing anything
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and taking the complete pension
and an Annuity rate of 6%.
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more plans are available
but I will use 6%.
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So here I can see the complete
corpus of Rs 11,14,407.
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The expected pension in
this is Rs 5572.
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I just proved to you that pension is more
in APY with the same amount
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invested in both NPS and APY.
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You can compare it with any age
and any contribution.
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I have given a link for the
calculator in the description.
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So you saw that the pension is almost
similar in both, but a little more in NPS.
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So the answer to our question of whether
we should open an account in both is no.
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Because the pension is similar in both and
only a little bit more in NPS.
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Since our investment amount is fixed, you
will not be able to invest double the amount.
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If you invest a part of your monthly salary,
you do not need to invest in both
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because the returns are similar in both.
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I agree that the guaranteed pension
of APY is a bit more fascinating
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but if you look at the math,
results are similar in NPF.
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You should ask yourself if you want to
invest Rs 42, Rs 210 or Rs 500 or
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you want to make bigger investments.
If you want to make a bigger investment,
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upon investing Rs 2350 then you will get
a pension of Rs 14,000 and lacs for withdrawal.
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But in APY, the pension amount is also capped,
there is no plan for more than Rs 5000
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and the contribution amount is also capped.
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This means even if I want I cannot
invest more than Rs 376.
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So, in my opinion, you should go for
NPS because it is a lot more flexible.
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You can increase your contribution any time
you want, depending on the
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increase or decrease in your salary
and maximize your retirement corpus.
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Here you also have Tax benefits and get
deductions of Rs 1,50,000 from etc
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and an additional deduction of Rs 50,000
giving you a total of Rs 2,00,000 deductions.
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You can claim in APY too but the claimable amount
would be less.
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Now if we talk about having an EPF account
already. Should you open an APY account?
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My answer would be that either you stick to EPF or
if you want to open a new account,
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then open an NPS account because
that is more profitable.
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But APY is strictly for those who can
not afford more contributions.
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And as I said before, the scheme document
states clearly that this scheme
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is focused on the unorganized sector.
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So the question is who should
open an APY account?
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You should open an APY account if
you work in the unorganized sector and if you
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cannot afford the contributions and
there is no retirement planning yet.
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Hence, in APY the contribution is kept as Rs 42,
Rs 200 etc and a guaranteed pension
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is given to provide secure future.
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So APY is made people who cannot
afford to invest more than Rs 500 in NPS.
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Now you have decided for yourself what you
want to do after seeing the comparison.
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I am assuming you would be either
my age or older than me.
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So it makes sense that you'd be concerned
about your retirement & would want to invest.
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But think about one thing which I'm sure we
can all relate to that we have started
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investment and planning much later in life.
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The power of compounding dictates that you
should start earlier and invest longer
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to receive bigger amounts.
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I regret not starting 2-3 years earlier
and I'm sure you do too.
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College students and first-time job doers
will regret this later when they are as old as me.
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It will be too late by the time they
understood this.
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If you know any such people then send
them this video & explain
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to them the power of compounding.
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Send them YouTube videos on Whatsapp &
encourage them to start investing
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no matter how small the investment.
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Now you know that NPS will provide
a Rs 14,000 to Rs 30,000 pension.
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But will it be a significant
amount when you retire?
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Because by then even Rs 30,000
will not be a big amount.
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Along with NPS, you should also
invest in the stock market.
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If you do not know how to pick stocks,
then it is only a matter of time.
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If you open a Demat account & buy a share
for Rs 100 or 200 then that will help you
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understand the share market.
You won't know until you start.
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That is why I have given a link for
Zerodha in the description.
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I recommend you to use Zerodha
as I myself use Zerodha.
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If you wish to support our hard work
and videos then you can support us
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without cost by creating a Demat
account at this link.
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I have made a video on how to
make a Demat account.
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I have also made a video on how
to purchase shares from the Kite app.
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So this was all about NPS vs APY.
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I will see you soon in another video until
then share, like, and subscribe
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and don't forget to press the bell icon.
Bye-bye.
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