Along with Jan Bima Yojanas, the Modi-led-NDA Government announced the Atal Pension Yojna (APY) in the union budget 2015-16 in its endeavour to provide social security to workers in the unorganized sector.
PersonalFN here brings you the key features of this Scheme…
What is it: APY aims to provide pension to workers (who are citizens of India) from the unorganised sector but who are bank account holders. APY will help them voluntary save for retirement.
Amount of Coverage: Pension under APY is guaranteed by Government of India and the subscriber of the Scheme will receive a fixed pension of Rs 1,000 per month, Rs 2,000 per month, Rs 3,000 per month, Rs 4,000 per month or Rs 5,000 per month, at the age of 60 years, depending on their contributions, which itself would be based on the age of joining the APY.
The age of joining and contribution period: The minimum age to join APY is 18 years, while the maximum is 40 years. But the age of exit and start of pension is 60 years. Thus the minimum period of contribution by the subscriber under APY would be 20 years or more.
How much contribution is required: Monthly contribution will depend upon age at entry and the pension you want after retirement. For example, an 18 year old individual opting for this scheme who wants Rs 1,000 per month as pension needs to contribute Rs 42 per month till the age of 60 years. But if he want to enjoy a monthly pension of Rs 5,000, he will need to contribute Rs 210 per month.
For a 40 year individual opting for APY, wanting a monthly pension of Rs 1,000 per month, Rs 291 per month would need to be contributed till the age of 60 years. But if he wants a monthly pension Rs 5,000, a sum of Rs 1,454 per month would be his contribution.
The Central Government would also contribute 50% of the total contribution or Rs 1,000 per annum, whichever is lower to each eligible subscriber account. It should be noted that Government’s contribution is available for only those who are not covered by any Statutory Social Security Scheme and is not an income tax payer. Government’s contribution will be for a period of 5 years starting from Financial Year 2015-16 to 2019-20 and for subscribers who join the scheme between June 1, 2015 to December 31, 2015.
Are there any charges in case of delay in paying the contribution amount: Banks are required to collect additional amount for delayed payments, which may range between Re 1 to Rs 10 per month depending upon the contribution amount.
- Rs 1 per month if the contribution is upto Rs 100 per month
- Rs 2 per month if the contribution is between Rs 101 – Rs 500 per month
- Rs 5 per month if the contribution is between Rs 501 – Rs 1,000 per month
- Rs 10 per month if the contribution is above Rs 1,000 per month
What happens in case of discontinuance of payment of contribution amount: Well, discontinuance of payments of the contribution shall lead to the following:
- After 6 months the account will be frozen
- After 12 months the account will be deactivated
- After 24 months the account will be closed
What happens in case of death of the subscriber: In case of death of the subscriber the pension is payable to the spouse and on the date when both of them expire, the pension corpus is payable to the nominee.
Is there an exit option available before attaining 60 years of age: No, exit before 60 years of age is not permitted. However only in some exceptional circumstance such as death of the beneficiary or terminal disease, it may be permitted.
Tax benefit: Unlike the Jan Bima Yojana, contribution to APY is not eligible for deduction under Section 80C . Moreover, the monthly pension received by the subscriber would be subject to tax.
What should you do?
PersonalFN is of the view that while Government is thinking in the right direction to provide secured retired life to the people, the pension amount receivable from this scheme is too low accounting for inflation. Even the maximum pension amount of Rs 5,000 per month receivable in minimum time frame of 20 years will not have any significance because of sky rocketing inflation. Hence, you should not totally depend upon Atal Pension Yojana for your retirement. It can just be a part of your retirement solution and not the complete solution in itself.
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