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
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 English – Application 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)
If we r contributing for 5000 pension amt now but in future if we not able to pay for high ,can we cut to less amt at any time
Yes Reshma, you can decrease or increase your monthly contribution, but only once a year in the month of April.
sir in ur above conversation,i notice that according to u, !!nterest calculated in table of apy Is low ,what u suggest to join the scheme???
Hi Reshma,
I don’t think this is a good scheme from returns point of view. Even with government contributing 50% or Rs. 1,000, whichever is lower, the return this scheme would generate for you is just 0.66% per month. This doesn’t seem lucrative to me.
i m a govt. servant and elligible for pension after retirement . is my wife who is housewife elligible for Atal Pension Yojna. seeking for early reply.
Hi Mr. Vinod,
If your wife is 40 years or below, then she is eligible for this scheme.
Dear Sir/madam
i want to be a agent for this scheme
pls let me know how can we become an agent in Post office to sell their accounts as well as Atal pension scheme………..
NABIN SARMAH
GUWAHATI
9706231283
Hi Nabin, I have no idea about it. You need to contact the PFRDA or their aggregators for the same.
Sir,
I have already subscribed in NPS Lite Scheme from FY 2014-15.
I am submitting Rs. 5000 p.a. on 1st week of April and plan to do so till possible.
I find APY monthly payment tedious as it is highly possible that there are insufficient funds for some months. Can we ask the Banks to deduct the amount at one go, rather than every month.Would you suggest me to switch to APY or continue with NPS Lite Scheme.
And I shall be grateful if you could let me know the Pros and Cons of both NPS Lite and APY.
Hi Satish,
I have never analysed NPS Lite and don’t know much about that scheme, so won’t be able to advise you about that. Also, I think there is no provision for a one time deduction in APY, but I think monthly contribution amount is too low. I would say one should keep one year’s contribution amount in that account so that there is sufficient balance in it.
I and my wife are not paying any income tax at present but what if we both become taxpayers after joining this scheme
Not sure how the government is going to track these things.
Shiv, you have been saying in the comments below that persons who are paying income tax cannot join APY. From my reading of APY scheme details on NPS website, my understanding is that government co-contribution of 50% or Rs 1000/- will not be contributed for IT payers, and anyone can participate in APY. Can you confirm this. Thanks,
Sorry John, you are right in your observations. I was under the impression that this scheme is only for the workers in the unorganised sector and it is not for everybody. But, if a person is a tax payer or covered under any other social security scheme, then the government will not contribute its share of up to Rs. 1,000 in that account.
Hi,
I am totally confused in one point. No where it is written that if a person has EPS, s/he won’t be able to join the APY . Only it has been written that if a person in under coverage of any social security scheme like EPFO and EPS and s/he is a tax payer then, s/he won’t be eligible to get the govt contribution. correct me if I am wrong.
Hi Avik, you are right in your assessment. I was wrong when I was under the impression that this scheme is only for the workers in the unorganised sector and it is not for everybody. My assessment was based on the scheme details when it got announced in March.
Sir I am a govt employee covered under Hp fund scheme am I eligible for APY
Hi Niyaz,
Any Citizen of India can join APY scheme. The following are the eligibility criteria,
(i) The age of the subscriber should be between 18 – 40 years.
(ii) He / She should have a savings bank account.
(iii) The prospective applicant should furnish his/her mobile number details to the bank during registration.
Government co-contribution is available for 5 years, i.e., from 2015-16 to 2019-20 for the subscribers who join the scheme during the period from 1st June, 2015 to 31st December, 2015 and who are not covered by any Statutory Social Security Schemes and are not income tax payers.
i nps govt isuued a PRAN CARD to customer,, Like that in apy,, Customer will get PRAN CARD or not
Hi Sujit,
Nothing has been announced in this matter as yet.
This link is not working.
And Thanks for this link.
Please visit this link – https://npscra.nsdl.co.in/pop-sp.php and click on POP-SP Details
my wife have a mis of 4.50 lacs in post office and ppf account and a newly opened demat account with no trading or investment so now weather she is eligible for this scheme or not and she no other income she is a house wife and she don’t pay any income tax and what statutory social security scheme means
Hi Nitesh,
I can suggest somebody’s eligibility only based on certain basic terms of this scheme. In order to confirm one’s eligibility, he/she needs to approach the appointed aggregators or points of presence. Here is the list of all those PoPs and aggregators – https://npscra.nsdl.co.in/download/subscriber-corner/entities-in-NPS/POP-POP-SP/POP-SP%20–%20Details%20–%2017.03.2015.zip
Dear Sir,
My DOB is 09.01.1975. Am I eligible for Atal Pension Yojana?
I have paid tax on interest on FD in my name with SBI. Am I disqualified for the scheme.
Please let me know.
Regards
Tapashi
Hi Tapashi,
This scheme is designed for low income group workers working under the unorganised sector. So, tax payers or workers covered under any of the statutory social security schemes are not eligible for this scheme.
Sir,
I am a housewife with 4.50 lacs in FD on monthly interest, on which tax has been deducted. Still I am disqualified? Why? Kindly clarify.
Hi Tapashi,
I am not saying whether you are qualified for this scheme or not. As you mentioned that you paid tax on interest on FD, it makes you a tax payer. You need to further get it clarified with any of the aggregators / points of presence whether you are eligible for this scheme or not.
Hi! I am mamita mishra working in a private sector. My date of birth is 01-12-1974.can I avail APY from 1st June2015?
Hi Mamita,
If you are not a tax payer and not covered under any of the statutory social security schemes, then you are eligible for this scheme.
Nomination is eligable, pls confirm
Yes Debjit, nomination facility is available.
Hi I am in 40plus not 41 can I join in this plan
Yes Prabira, it seems that you can subscribe to this scheme.
thanks shiv and can I open this scheme in any branch of my bank or only at home branch and is there any tds on pension amount
Hi Nitesh,
You need to approach banks or other service providers which are registered as points of presence and aggregators for this scheme. Here is the list of all those PoPs and aggregators – https://npscra.nsdl.co.in/download/subscriber-corner/entities-in-NPS/POP-POP-SP/POP-SP%20–%20Details%20–%2017.03.2015.zip
Pl real informaction atalpansion yojna
For 1000 pension plan the total corpus value is 1.7 lakh. If this divided by 1000 the total number of months of pension will be 170 months i.e. almost 14 year. What would happen if person lives for hundred year (pension duration 40 years) will the Govt give the pension till that age.
Yes Tariq, pension will be given till the time the subscriber is alive. After his/her death, the whole corpus (Rs. 1.70 lakh in this case) will be paid back to the nominee. Rs. 1,000 is the pension amount which Rs. 1.70 lakh of corpus would be generating for you.
Thanks shiv for replying . So you mean apart from getting the pension till the time of death, the corpus money is quiet separate and will be given back to the nominee for sure.
Yes, that is correct.
Hello Shiv, you have been sharing great information,thanks for this. People are very much curious to know that if this pension scheme will really have the edge on other scheme like Post office RD,PPF,FD etc in terms of monetary benefit . Can you give some analysis or any link where some one did this analysis. I know that apart from monetary benefit other factor do matter but here i want to focus on monetary benefit.
Thanks Tariq,
I think, from returns point of view, this scheme is not a great scheme. I have done some calculations in the table pasted above. Returns getting generated in this scheme are way below PPF or SSA and I think it would be lower than NPS also.
exactly 7000 a month and that is 2000 more than this scheme but if the pension amount is tax free in atal pension scheme then only I & my wife will apply in this scheme so please suggest me
It may be EET or EEE by the time you attain 60 years. One cannot speculate on that presently. A subscriber has to consider all pros and cons before investing in long term instruments/products like APY.