Atal Pension Yojana: Who’s it for?

The Atal Pension Yojana, aimed at unorganized sector works, offers a subscription-based pension

For most working people, post-retirement income is often a cause of worry. While government employees enjoy pensions, those in the private sector have to ensure enough investments to meet expenses after their retirement. 

People working in the unorganized sector find it hard to make ends meet after their working lives are over because of low savings rates and lack of financial literacy. It is for this section of people that the government came up with the Atal Pension Yojana (APY). This pension scheme is administered by the Pension Fund Regulatory and Development Authority (PFRDA) through the NPS (National Pension System) architecture.

Features of APY:

• APY is open to all citizens between the ages of 18 and 40.
• The pension will start once the subscriber reaches the age of 60, so the minimum contribution would be for 20 years.
• Subscribers will get a guaranteed monthly pension ranging from Rs. 1,000 and Rs. 5,000 per month depending on their contribution.
• The government will make a matching contribution of 50 per cent of a subscriber’s contribution, or Rs. 1,000, whichever is lower. This contribution is available only to those who are not covered by any other statutory social security schemes and are not income taxpayers.
• The government contribution will be for a period of five years, for those who joined the scheme between 1 June 2015 to 31 December 2015.
• Contributions to the scheme will be auto-debited from the subscriber’s account each month. A penalty will be levied for delayed payments.
• If payments are discontinued, the account will be frozen after 6 months, deactivated after 12 months and closed after 24 months.
• The pension will be available to the spouse after the demise of the subscriber. The spouse of the deceased also has the option of exiting the scheme and claiming the accumulated amount. 
• If both subscriber and spouse are deceased, the pension corpus would be returned to the nominee.
• Subscribers can exit the scheme prematurely only in exceptional circumstances, like the death of the beneficiary or terminal illness.

As the table above indicates, if a subscriber enters the scheme at 18, he or she will have to contribute Rs. 42 each month to get a pension of Rs. 1,000 after the age of 60, Rs. 84 for a pension of Rs. 2,000, Rs.126 for Rs. 3,000, and Rs. 210 for Rs. 5,000. The return from investments would work out to slightly over 7.6 per cent over a period of 42 years, which is not bad considering that it’s a safe, government-backed scheme. 

Certainly, this wouldn’t be a scheme to opt for if you are financially savvy, since investing in the stock market would fetch you much higher returns. But since this is a scheme meant for unorganised workers, whose financial literacy is quite low, it’s a pretty good option. You don’t necessarily have to be an unorganised sector worker to have an APY account, but if you’re paying income tax, it’s not open to you.

You can open an APY account at the bank or post office in which you have a savings account. You can also get enrolled online through Internet Banking.