Atal Pension Yojana – Government Guaranteed Pension Scheme for the Unorganised Sector

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

Pradhan Mantri Suraksha Bima Yojana (PMSBY)

88% of India’s total labour force of 47.29 crore belongs to the unorganised sector, in which the workers do not have any formal provision of getting a regular pension payment on retirement. Moreover, due to increasing labour wages and better medical facilities, these people also face a risk of increasing longevity. So, this work force would require some kind of assured income guarantee to sustain itself in the coming years.

Launching Atal Pension Yojana (APY) from June 1, 2015

To encourage workers in the unorganised sector to voluntarily save for their retirement, the government of India will be launching a new scheme, called Atal Pension Yojana (APY), from 1st June, 2015. Finance Minister Arun Jaitley announced this scheme in his budget speech on February 28th.

This scheme will replace the UPA government’s Swavalamban Yojana – NPS Lite and will be administered by the Pension Fund Regulatory and Development Authority (PFRDA). The benefits of this scheme in terms of fixed pension will be guaranteed by the government and the government will also make contribution to these accounts on behalf of its subscribers.

Under this scheme, a subscriber would receive a minimum fixed pension of Rs. 1,000 per month and in multiples of Rs. 1,000 per month thereafter, up to a maximum of Rs. 5,000 per month, depending on the subscriber’s contribution, which itself would vary on the age of joining this scheme.

The minimum age of joining this scheme is 18 years and maximum age is 40 years. Pension payment will start at the age of 60 years. Therefore, minimum period of contribution by the subscriber under APY would be 20 years or more.

The Central Government would also co-contribute 50% of the subscriber’s contribution or Rs. 1000 per annum, whichever is lower, to each eligible subscriber account, for a period of 5 years, i.e., from 2015-16 to 2019-20, who join the NPS before 31st December, 2015 and who are not income tax payers. The existing subscribers of Swavalamban Scheme would be automatically migrated to APY, unless they opt out.

Who is eligible for Atal Pension Yojana?

Any Citizen of India, aged between 18 years and 40 years, who has his/her savings bank account opened and also possesses a mobile number, would be eligible to subscribe to this scheme.

Government Funding – Indian Government would provide (i) fixed pension guarantee for the subscribers; (ii) would co-contribute 50% of the subscriber contribution or Rs. 1,000 per annum, whichever is lower, to eligible subscribers; and (iii) would also reimburse the promotional and development activities including incentive to the contribution collection agencies to encourage people to join the APY.

Who is eligible for Government Co-Contribution in Atal Pension Yojana?

Subscribers of this scheme, who are not covered under any other statutory social security scheme and are not income tax payers, would be eligible for the government’s co-contribution of up to Rs. 1,000 per annum.

Social Security Schemes which are not eligible for Government Co-Contribution

  • Employees’ Provident Fund (EPF) & Miscellaneous Provision Act, 1952
  • The Coal Mines Provident Fund and Miscellaneous Provision Act, 1948
  • Assam Tea PlantationProvident Fund and Miscellaneous Provision, 1955
  • Seamens’ Provident Fund Act, 1966
  • Jammu Kashmir Employees’ Provident Fund & Miscellaneous Provision Act, 1961
  • Any other statutory social security scheme

Minimum/Maximum Pension Payable – This scheme will pay a minimum pension of Rs. 1,000 per month and a maximum pension of Rs. 5,000 per month, depending on the subscriber’s own contribution per month.

Minimum/Maximum Period of Contribution – As the minimum age of joining APY is 18 years and maximum age is 40 years, minimum period of contribution by the subscriber under this scheme would be 20 years and maximum period of contribution would be 42 years.

Atal Pension Yojana – Contribution Period, Contribution Levels, Fixed Monthly Pension and Return of Corpus to the Nominees of Subscribers

Picture 3

Internal Rate of Return (IRR) – Thanks to the government funding of Rs. 1,000 per annum per subscriber account for 5 years, your account would generate an IRR of approximately 0.66% per month or 8% per annum. This pension amount per month is fixed and the government has made it clear that if the actual returns on the pension contributions are higher than the assumed returns, such excess return will be credited to the subscribers’ accounts, resulting in enhanced pension payment to the subscribers.

Minimum Contribution – A subscriber aged 18 years will have to contribute a minimum of Rs. 42 per month in order to get Rs. 1,000 pension per month starting 60 years of age. For a 40 years old subscriber, his/her minimum contribution would be Rs. 291 per month. The contribution levels would vary and would be low if subscriber joins early and increase if he joins late.

Maximum Contribution – A subscriber aged 40 years will have to contribute Rs. 1,454 per month in order to get Rs. 5,000 pension per month starting 60 years of age. For a 18 years old subscriber, his/her contribution for Rs. 5,000 monthly pension would be Rs. 210 per month.

Can I increase or decrease my monthly contribution for higher or lower pension amount?

The subscribers can opt to decrease or increase pension amount during the course of accumulation phase, as per the available monthly pension amounts. However, the switching option shall be provided only once in a year during the month of April.

What will happen if sufficient amount is not maintained in the savings bank account for contribution on the due date?

Non-maintenance of required balance in the savings bank account for contribution on the specified date will be considered as default. Banks are required to collect additional amount for delayed payments, such amount will vary from minimum Re. 1 to Rs. 10 per month as shown below:

(i) Re. 1 per month for contribution upto Rs. 100 per month

(ii) Rs. 2 per month for contribution upto Rs. 101 to 500 per month

(iii) Rs. 5 per month for contribution between Rs. 501 to 1,000 per month

(iv) Rs. 10 per month for contribution beyond Rs. 1,001 per month.

Discontinuation of payments of contribution amount shall lead to following:

After 6 months account will be frozen.

After 12 months account will be deactivated.

After 24 months account will be closed.

Subscriber should ensure that the Bank account to be funded enough for auto debit of contribution amount. The fixed amount of interest/penalty will remain as part of the pension corpus of the subscriber.

Post-Retirement Rate of Return – Considering a retirement corpus of Rs. 1.7 lakh and monthly pension of Rs. 1,000, this scheme is going to generate a return of 0.59% per month or 7.1% per annum for its subscribers. I think this return is also on a lower side.

Nomination Facility – This scheme will also provide the nomination facility to its subscribers. In case of the subscriber’s death after attaining 60 years of age, the whole corpus generating the pension income to the subscriber would be returned back to the nominee of the subscriber. In case of untimely death of the subscriber before 60 years of age, the balance would be returned back to the nominee of the subscriber.

Where to open APY Accounts – You need to approach points of presence (PoPs) and aggregators under existing Swavalamban Scheme. These agencies would enrol you through architecture of National Pension System (NPS).

Points of Presence & Aggregators

Application Form – Here you have the links to the application form for subscribing to Atal Pension Yojana – Application Form in EnglishApplication Form in Hindi

I think a subscriber should opt for a minimum monthly contribution of around Rs. 167 or so, which would make it approximately Rs. 2,000 annual contribution. 50% of Rs. 2,000 i.e. Rs. 1,000 would be contributed by the government as well. So, the subscriber will get the maximum benefit of government funding.

As mentioned above, the scheme would start from June 1, 2015. So, interested people will have to wait till then to open an account. If you have any other query regarding this scheme, please share it here.

Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

Pradhan Mantri Suraksha Bima Yojana (PMSBY)

Application Form in English

Application Form in Hindi

926 thoughts on “Atal Pension Yojana – Government Guaranteed Pension Scheme for the Unorganised Sector”

  1. Hi,

    I dont know if I am calculating correctly.

    For Example:
    An Indian national of age 30 is depositing Rs 577 / month in a Bank RD at 8.75% interest (instead of APY scheme) he will accumulate Rs 7,89,376 interest and Rs 2,07,720 as principle. Totalling to 9,97,096. If he keeps the same amount in Bank FD @ 8.5% interest per annum he can earn Rs 10,037 / month instead of pension guranteed of Rs 5000 / month by the APY scheme. Additionally on the death of that person the nominne can get Rs 9,97,096 from Bank FD instead of Rs 8,50,000 guranteed by the APY.

    So is the APY scheme really worth ?

    1. If we consider your example, the following points are to be considered first:

      1. There are no financial products in India which offer Recurring Deposit (i.e., RD) for a tenure of 30 days. At max. you can have it for 10 years and not beyond that. Beyond 10 years you may renew RD but may not be at same interest rate.

      2. Since it is a long term investment (i.e., 30 years), if interest rate remains constant or increases in the financial market then only return on investment in APY will be less as per your example/illustration. In case, if the opposite happens and interest rates reduces in the financial market due to lesser inflation or deflation, your pension or corpus in APY will not get reduced and remains the same as assured by GOI.

      So, there are both positives and negatives in the scheme and it all depends upon individual perceptions on the long term investments.

  2. I want to know about if i will get death after registration then gov will give pension to the nominee?

    1. Hi Mr. Krishna,
      It is a pension plan for the subscriber of this scheme and no pension is paid to the nominee. If the subscriber dies after 60 years of age, then the whole corpus will be paid back to the nominee. If the subscriber dies before 60 years of age, then whatever balance gets accumulated in the account along with the interest will be paid back to the nominee.

  3. Sir,in the schem of apy corpus amount will be paid to nominee at the age of 60(subscriber)or at the death of subscriber.

    1. Hi Eswar,
      If the subscriber dies after 60 years of age, then the whole corpus will be paid back to the nominee. If the subscriber dies before 60 years of age, then whatever balance gets accumulated in the account along with the interest will be paid back to the nominee.

  4. Dear sir
    Pension statrts from age 60yr for how many yrs

    It can be withdran in beween or any loan fascility on it
    Kindly clear it

    1. Hi Dr. Thakur,
      Pension will be paid to the subscriber till the time he/she is alive, there is no age cap for your pension payments. If the subscriber dies after 60 years of age, then the whole corpus will be paid back to the nominee.

      Also, neither you can withdraw any money in between before 60 years of age nor any loan facility is there. Money can only be withdrawn in exceptional circumstances i.e. in the event of the death of the subscriber or any terminal disease.

  5. sir, who alredy join in nps tiar I &II . can this person also joined atal pension scheme plz tell me i am confused…..

    1. No Javed, the subscribers of NPS tier I & II are not eligible for this scheme. Only the existing subscribers of Swavalamban Scheme – NPS Lite are eligible to be migrated to this scheme.

  6. sir,
    any person aged 34yrs., getting salary from private concern and also if he is taxpayer, could he be eligible for atal pension yojna. what amount he should invest per month for this scheme to get maximum benefit.

  7. I need 2 confirmation regarding APY:
    1. No matter till what age the subscriber will be alive,he/she will get the pension as per subscribed plan till his/her death.
    2. Apart from pension benefit,Entire corpus money will be returned back to the nominee after subscriber death.

  8. Since last 2 year we r involve with NPS lite swavalamban yojna. We processed around 5000 NPS lite ac. Now we r in confuse abt this fatal yojna. Can u tell me the difference between the 2 yojna.

  9. I very happy about Atal Pension Jojana . But age of 18 to 40 age people only eligible.I am intrest to join this yojana but my age is 48 . My request is please consider and help above 40 years people. Thanking you Sir / Madam

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