Thursday, June 18, 2015

Atal Pension Yojana – Explained


The Atal Pension Yojana is a Pension Scheme offered by the Government of India to help Indian Citizens receive a pension in their old age. This is yet another Social Security scheme launched by our Hon’ble Prime Minister Mr. Modi. The purpose of this article is to help understand the details of this scheme.

Before we Begin – Why this scheme?

India is one of those countries that does not offer any nationwide Social Security scheme where citizens are protected in their old age. Many western countries offer this facility and our Hon’ble prime minister had promised to address this after he took charge.

The purpose of this scheme is to help the low income group working class of India who are employed in the unorganized sector and do not have any formal life savings like EPF or any other schemes.

So, what is this Atal Pension Yojana?

The Atal Pension Yojana is a Pension Scheme that is administered by the Pension Fund Regulatory and Development Authority (PFRDA) through NPS architecture. Citizens can signup for the National Pension Scheme or NPS (which has been covered in great detail in this blog – click here to know more) when they are aged between 18 and 40 years. The amount of pension they receive will be a combination of the amount they contributed and the no. of years they contributed towards their NPS account.

The Government of India would guarantee the pension that the citizens who enrol in this Atal Pension Yojana are supposed to get post retirement. The minimum monthly pension that subscribers could get would be between Rs. 1000/- and Rs. 5000/- per month.

Who is Eligible for Atal Pension Yojana?

The Atal Pension Yojana is open to all Citizens of India who hold bank accounts who are aged between 18 and 40 years. The exit age and start of the pension will be 60 years. This makes the minimum contribution period as 20 years (Assuming someone signs up at 40 years of age)

How to Subscribe to the Atal Pension Yojana?

All Points of Presence (service providers) of the NPS Swavalamban scheme would be eligible to enroll subscribers for the Atal Pension Yojana.

The amount you wish to contribute will be automatically deducted from your account. Based on the amount of pension you wish to receive (Between Rs. 1000 to Rs. 5000) and your age, the monthly contribution expected from your side will get determined. You are expected to make this contribution every month without fail. You can however choose to increase or decrease your future monthly pension amount and based on this, your monthly contributions will get adjusted automatically. A point to note here is that this change in pension amount (And contribution) can only be done Once every year during the month of April.

Are there any special benefits for signing up for the Atal Pension Yojana?

Yes, there are. As this scheme is specifically targeting the lower income groups from the unorganized sectors, the government is offering to contribute 50% of the amount contributed in a year or Rs. 1000/- (whichever is lower) every year for the first five financial years of the scheme – FY 2015-16 to FY 2019-20. This extra contributions is available for all new joiners who enrol into the scheme between 1st June 2015 and 31st December 2015 and who are not members of any statutory Social Security Scheme and who are not Income Tax Payers (People who fall below the minimum income group to fall into any tax bracket).

Atal Pension Yojana and the NPS Swavalamban Scheme

Existing Swalamban subscribers will be given an option to automatically migrate to the Atal Pension Yojana scheme. However, a key point to note here is that, the total additional Rs. 1000/- contribution each year will be limited to a maximum of 5 years. So, if someone received this Rs. 1000/- once as part of NPS Swavalamban, they will get the benefit for only 4 years under Atal Pension Yojana.
Swavalamban subscribers who are aged above 40 and those who do not wish to continue may opt out of the Swavalamban scheme by complete withdrawal of the entire corpus or may prefer to wait until they reach 60 years of age to start receiving the annuities (pension).

Missed Payments and Penalties

As with any investment scheme, the subscriber is expected to make timely contributions towards their accounts. As the amount is auto-debited from your bank account, you are expected to maintain sufficient amount in your account.

In case, the monthly payments are missed, the penalties would be as follows:
1. Rs. 1 per month for contributions up to Rs. 100 per month
2. Rs. 2 per month for contributions between Rs. 101 to Rs. 500 per month
3. Rs. 5 per month for contributions between Rs. 501 to Rs. 1000 per month
4. Rs. 10 per month for contributions above Rs. 1001 per month

By paying the penalty plus the delayed amounts, the subscriber can continue investing in the scheme. For ex: If someone paying Rs. 500 per month missed 3 monthly payments, he/she is expected to pay Rs. 1506 to revive their account.

In case the monthly contributions are missed continuously the following happens:
- After 6 months, the account gets Frozen
- After 12 months, the account gets De-activated
- After 24 months, the account gets Closed

Exit from the Scheme and Receipt of Pension Payments

Upon completing 60 years of age the subscribers will need to submit a request to the associated bank to start receiving their monthly pension.

Note: Closure of the account before achieving 60 years of age is only allowed in case of death of account holder or terminal illnesses.

Expected Monthly Contributions:

As mentioned earlier, the amount you are expected to contribute each month would vary based on your age and the amount of pension you wish to receive. As the minimum pension is Rs. 1000 and maximum Rs. 5000, the following would be the amount you are expected to contribute each month.

Age Monthly Contribution for Pension
Rs. 1000 Rs. 2000 Rs. 3000 Rs. 4000 Rs. 5000
18 years 42 84 126 168 210
19 years 46 92 138 184 228
20 years 50 100 150 198 248
21 years 54 108 162 215 269
22 years 59 117 177 234 292
23 years 64 127 192 254 318
24 years 70 139 208 277 346
25 years 76 151 226 301 376
26 years 82 164 246 301 376
27 years 90 178 268 356 446
28 years 97 194 292 388 485
29 years 106 212 318 423 529
30 years 116 231 347 462 577
31 years 126 252 379 504 630
32 years 138 276 414 551 689
33 years 151 302 453 602 752
34 years 165 330 495 659 824
35 years 181 362 543 722 902
36 years 198 396 594 792 990
37 years 218 436 654 870 1087
38 years 240 480 720 957 1196
39 years 264 528 792 1054 1318
40 years 291 582 873 1164 1454

Though this article covered the basics of the Atal Pension Yojana, you may still have a few open questions on this topic. The next article will be helpful in answering all your Questions on this subject.

4 comments:

  1. If someone joins APY at 27 years and then dies at 45 years what happens then?
    If some is not married and has just specified nominee
    If someone is married and has also specified nominee

    Is it possible to change nominee? If yes how

    ReplyDelete
    Replies
    1. Yes, you can change the nominee by filling up the requisite forms.

      IF the account holder dies, the survivor (spouse/child) will get the money

      Delete
  2. Hi If we start paying from 38 years... Till what age we have to pay?

    ReplyDelete

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