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Things you should know about Atal Pension Yojana scheme

The Atal Pension Yojana scheme is among the other social security schemes launched by honorable Prime Minister, Narendra Modi. This scheme was launched on 9th of May, 2015. Along with this scheme, the other two schemes that were launched are the Pradhan Mantri Jeevan Jyoti Beema Yojana (PMJJB) and Pradhan Mantri Suraksha Bima Yojana (PMSBY).

PMJJB and PMSBY are two insurance related schemes, while the Atal Pension Yojana is a pension related scheme, introduced mainly to target the workers in the unorganized sector. The main aim of this scheme is to provide financial security to individuals during their old age. The key feature of Atal Pension Yojana is that it provides a monthly income in the form of guaranteed pension after retirement age. Under this scheme, a guaranteed minimum of Rs. 1000 and a maximum of Rs. 5000 will be paid in the form of pension at the age of 60. This also depends on the contributions made by the scheme holder.

All Indian’s are eligible to secure this scheme till the time they have a savings bank account as a primary need. People between the ages of 18-40 years are eligible to apply. The monthly contribution from the scheme holder’s account will be auto-debited by the bank. Here, as a part of the Government’s co-contribution, they’re entitled to pay 50% of the total contribution amount, or Rs. 1000 per annum whichever is less, at least for a period of 5 years. This scheme will be available for subscribers who join the scheme in the period of June 1st 2015 to December 31st 2015.

Penalties in case of delay

If you fail to maintain a minimum balance in your savings account for the monthly contribution towards APY scheme, the account will be treated as default and is liable to penalties as charged by the bank. The penalty charges are between Rs. 1 per month which is minimum, and maximum of Rs. 10 per month. The penalty charges and breakup is as shown below –

  • Rs. 1 per month for monthly contribution up to Rs. 100
  • Rs. 2 per month for monthly contribution up to Rs. 101 to Rs. 500
  • Rs. 5 per month for monthly contribution up to Rs. 501 to Rs. 1000
  • Rs. 10 per month for monthly contribution up to Rs. 1001

In case of demise of the scheme holder

In case of demise of the scheme holder, the pension would be available to the spouse. In case of demise of both of them (scheme holder and spouse), the pension corpus shall be returned to the nominee attached.

Merits and demerits of Atal Pension Yojana scheme

The most appealing feature of this scheme is that it provides guaranteed pension, especially since we lack strong pension schemes, APY can be the one worth investing in. However, since the maximum amount offered under this scheme is Rs. 5000, considering the inflation rate, it’s an insufficient amount for retirement.

This scheme is mainly targeted at the lower-income groups from the unorganized sector, this will be of huge financial assistance to them, however; it may not attract the middle-income working groups.

One of the major drawbacks of APY is that the pension amount is not tax-free; this would naturally give a bare minimum of return to its subscriber.

Also since the locking period is too long, this scheme appears to be less liquid (you cannot withdraw the amount in between the tenure).

To conclude briefly, APY has its own merits and demerits. For the ones who have not made any investment in pension schemes or other relevant schemes, they can join APY since the monthly contribution is not very high.

Image source: PRDA and ICCI official social media pages

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