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. and if I am wrong than if balance amount will be paid to the nominee then how much interest they will give on the total amount that the holder have given to this scheme till his death before 60

  2. 1. What schemes come under statutory social security schemes?
    2. I have Lic policy and I can still open APY right?
    3. Is adhaar card mandatory? In APY form adhaar number is not mandatory though?

    Thanks
    Vishal

    1. Hi Vishal,
      1. EPF, Coal Mines PF, Assam Tea Plantation PF, Seamens’ PF, Jammu Kashmir Employees’ PF & other statutory social security schemes fall under this category.
      2. Yes, you can subscribe to APY. LIC policy is not a statutory social security scheme.
      3. Aadhaar Card is not mandatory to subscribe to APY.

  3. if husband died before 60 then her wife will get her husband’s pension right shiv @ total pension she will get 10000 till she is alive and after 60 the nominee will get 8.50 lacs is this correct

    1. No Nitesh, wife will not get her husband’s pension amount. She will get the corpus amount of Rs. 8.50 lakhs, if her husband dies after 60 years or the balance amount with interest, if he dies before 60.

  4. Hi
    Sir,
    I am 30yr old..if i contribute my monthly amount for 10yrs..after 10yrs if i dies,then my wife will get pension or nominee will get corpus or will retun back what amount i paid?

  5. Hi
    My date of birth 12 April 1992 then i want to open APY so please help me
    How to that’s account.

  6. 1. I am 28 now. Do we have an option to change our nominee after few yrs?

    2. Can we open APY in any branch but for the same bank?

    3. Can we have same nominee for 2 different APY accounts?

    4 . say after 60 yrs subscriber dies , will the nominee get pension amount every month or lumsum pension amount or both :)?

    1. 1. Yes Vishal, you will have the option to change your nominee.
      2. Did not get your query.
      3. Yes, you can have the same nominee for 2 different APY accounts.
      4. The nominee will get the corpus amount only, no pension will be paid to him/her.

  7. 1) After the death of subscriber after 60 yrs. Spouse ko pension milega kya ? 2) husband & wife can eligible separately in APY ? 3) A contractual employee under Govt. project but not income tax payer and not covered by any statutory social security schemes at present ( May be covered by any statutory social security schemes and pay income tax in future), now he/she eligible for APY or not? 4) what is the meaning of unorganized sector ? if a person not interest to take the pension after attaining 70 yrs, but want to refund the corpus, is it possible ? 5) if the monthly contribution stop before attaining 60 yrs due to financial crisis, than shall i can refund the deposited money with interest & when it possible ? if husband service at govt org. with avail pension facility , so his wife can eligible for APY ? ……satya.

    1. 1. No, nominee ko pension amount nahin milega.
      2. Yes
      3. Yes, he/she is eligible for APY.
      4. I do not have the precise definition of the Unorganised Sector.
      5. You need to check it with the aggregators.
      6. Yes, his wife would be eligible for APY.

  8. Hi Shiv,

    I am 35+ years old farmer , wants to go for APY for 5000 rs/month pension scheme. So my query are below :

    1. After completion of 60 years Applicant will get 5000 rs /month and nominee will get 8.5 Lakh rupees , it’s right ??
    2. If Applicant will be no more after some years(Like 5 or 10 years), then what will happen about deposit amount ?
    Please help to clear my doubt , Thanks in advance.

    2.

    1. Hi Arun,
      1. The nominee will get Rs. 8.5 lakh only when the subscriber’s is no more. The subscriber will get the pension money till the time he/she is alive.
      2. Rs. 8.5 lakh in itself is the balance amount (principal + interest earned). So, if the applicant dies after some years, the nominee will get Rs. 8.5 lakhs.

      1. Thanks Shiva!

        1. I have one physical Handicap unmarried sister (Age 30 years),she is getting PA pension by government (approx 200 Rs/month).Is She eligible for this??

        2. If Applicant will be no more after some years(Like 5 or 10 years) means not completed 60 years, then what will happen about deposit amount ?

      2. Thanks Shiva!

        1. I have one physical Handicap unmarried sister (Age 30 years),she is getting PA pension by government (approx 200 Rs/month).Is She eligible for this??

  9. my form of atal pension scheme is ready but some toll free number are saying yes & some are saying no as my birth date is 5 – 5 – 1975 and what if I submit the form if I am eligible for this scheme then 1454 will be deducted automatically from my saving account and if not then no amount will be deducted so shiv is this the right strategy or is there any risk @ at the time of 60 I can’t get any pension even my monthly instalments are dedicated so guide me

    1. Hi Navish,
      Any citizen of India can subscribe to APY, but if you are already a subscriber of EPF, your account won’t get the government contribution.

  10. dear shiv ji,
    my date of birth is 28.08.1987 so let me clear whether my nomine get total corpus amount after getting of pension for few months and then my death

  11. Sir
    where can I open nps a/c . What is the prosisior of a/c opening
    nps give me pension hole life?

  12. Dear Shiv Kukreja JI,
    I post a comments on 21-04-15 in regards to get the franchise of APY directly from the Government but not from any other sources. But you sir did not give any reply in this regards. You know better , if any chances or opper-tunity declear from any govt. a group of people come in front as a middle man . Like this I contacted with a person nearby my area he demanded three types of rates on three types of agency. Like CITY LEVEL, DISTRICT AND STATE. On enquiry I found some information Mr Yashin Khan of Abhipra Enterprise of MP STATE that not to pay any amount to any body as it is free to get the POP- SP.Now I am in confusion what to do.Awaiting your early reply on the issue. Thanks
    With regards

  13. I have a joint account where she is first holder and second I so can I give this saving account details in all the 6 forms or I have to open a new account where first name is I and second she because some banks are asking to open a new account with first name if he or she wants to apply all these 3 scheme

  14. dear shiv my birth date is 5 – 5 – 1975 so i am more than 40 or less than 40 because you have said that more than 40 are not eligible for atal pension scheme so please clear my doubt

    1. Hi Nitesh,
      You are just 40 years old and as per the terms of this scheme, you are eligible. How aggregators define 40 years for this scheme, it is still not clear to me. You need to contact the customer care team for confirmation.

  15. Hello Sir,
    My Age is 34, I am PF holder, Kindly suggest the Atal Pension Yojana is good for me else which pension plan is suitable for me. Please advice.

  16. Sir my age is 38 I am shopkeeper also pay income tex .can you tell which pension plan I can take
    will be thank you
    jatinder

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