Guaranteed Pension by Govt. of India
On 1st June the central govt has announced Atal Pension Yojana for all the bank account holders who are not the members of any social security scheme.
This scheme is basically designed for citizens in the unorganized sector weaker section of the society. People from the unorganized sector though because of their practical problems & compulsions do not provide enough attention towards saving to meet the requirements & problems of an old age. Those who are little bit aware of it & willing to save, for them appropriate financial institution (instead of some dubious credit cooperative societies) particularly for long term investments is equally important where their hard earn money will remain safe. On this background first time central govt has paid attention to this section of the society & tried to provide some assistance is also creditable even if it has some limitations.
Details of the scheme are as follows.
This scheme will be administered by the Pension Fund Regulatory Development Authority.
The scheme has age limit from 18 years to 40 years of age.
Initially the subscriber will have to select the amount of pension from the given option between Rs:-1000/- to Rs:-5000/- per month & accordingly shall have to pay a stipulated contribution which will be directly debited to his saving account.
Subscriber can change the pension option (may increase or decrease) only once in the year i.e in the month of April ( beginning of the new financial year).
GoI will co-contribute to each eligible subscriber, for a period of 5 years who joins the scheme between the period 1st June, 2015 to 31st December, 2015. The benefit of five years of government Co-contribution under APY would not exceed 5 years for all subscribers including migrated Swavalamban beneficiaries.Option of exist before 60 years is not available.
Govt understands the financial difficulties of this sector & kept a practical view while dealing with issue of recovery date. Subscription can be recovered till the last day of the month to avoid any delay or default or late payment charges.
In spite of such flexibility even if delay or default happened late payment charges are minimum i.e.
Re:-1 per month for the contribution upto Rs:- 100/-
Rs:-2 per month for the contribution between Rs:-101/- to 500/-
Rs:-5 per month for the contribution between Rs:-501/- to 1000/-
Rs:-10 per month for the contribution above Rs:-1001
However subscriber voluntarily discontinues the payment Within 6 months from the date of account opening – his account will be frozen.
After 12 months from the date of account opening – his account will be deactivated.
After 24 months from the date of account opening – his account will be closed.
To start pension subscriber shall submit a request to his associate bank on completion of his 60 years of age.
The pension will remain continue to the spouse even after the death of subscriber & after spouse’s death corpus will be returned to the nominee.
Subscriber’s of the existing swavalamban scheme open for the age group of 18 to 40 years will be automatically migrated to this scheme.
Though prima fascia this scheme appears good for the particular section of the society but as stated above it has some limitations.
Depending upon the contribution of the subscriber, below mentioned is a chart of the corpus will be accumulated at the age of 60 of the subscriber.
Subscriber opted a pension option of Rs:-1,000/- = Rs:-1,70,000/-
Subscriber opted a pension option of Rs:-2,000/- = Rs:-3,40,000/-
Subscriber opted a pension option of Rs:-3,000/- = Rs:-5,10,000/-
Subscriber opted a pension option of Rs:-4,000/- = Rs:-6,08,000/-
Subscriber opted a pension option of Rs:-5000/- = Rs:-8,50,000/-
Interest generated on this corpus shall be given to the subscriber’s in the form of monthly pension. If we take a close look on the return of investment it will be only 7.06% which is even significantly low than interest rates on recurring deposits in banks.
This scheme is designed for non taxpayers so tax benefit is neither available on the part of contribution nor on the amount of pension as it will be added to your income.
Last but certainly not the least important factor is of inflation even if we look at the average inflation history which hovers between 4 to 6.5% ( WPI ). Cost of living in urban India is certainly more expensive. So even if subscriber gets a monthly pension of Rs:-5000/- after 25 to 40 years of his investment (depending upon his age of enrollment) by the time what will be the value of that amount.