Atal Pension Yojana (APY) is a government-initiated pension scheme designed to provide a steady income to citizens in their old age, particularly targeting workers in the unorganized sector. The scheme ensures a guaranteed monthly pension of Rs. 1,000 to Rs. 5,000 after the age of 60, depending on the contributions made by the subscriber.
Eligibility Criteria for APY
- Age Range: The subscriber must be between 18 to 40 years.
- Bank Account Requirement: A savings bank account or post office savings account is mandatory.
- Aadhaar and Mobile Number: Providing Aadhaar and a mobile number during registration is optional but recommended for easier communication and updates.
Importance of Pension
Pensions are crucial for maintaining a stable income after retirement. Several factors highlight the importance of pensions:
- Reduced earning capacity with age.
- The rise of nuclear families and migration of earning members.
- Increasing cost of living.
- Longevity of life.
- Assured monthly income helps sustain a dignified lifestyle during old age.
Government’s Contribution
The Government of India offers co-contribution to eligible subscribers for a period of five years, from 2015-16 to 2019-20. This benefit is only available to those who joined the scheme between June 1, 2015, and March 31, 2016, and are not covered under any statutory social security scheme or are non-income tax payers.
Key points include:
- The government contributes 50% of the subscriber’s contribution, up to a maximum of Rs. 1,000 annually.
- Government co-contribution is credited to the subscriber’s savings bank account/post office account at the end of the financial year.
- Subscribers who are part of statutory social security schemes, such as the Employees’ Provident Fund, are not eligible for this benefit.
Key Benefits of APY
- Guaranteed Pension: The government guarantees a minimum pension even if the returns from contributions fall short of the guaranteed amount. If the returns exceed expectations, the excess will be credited to the subscriber’s account.
- Government Co-contribution: Eligible subscribers benefit from a 50% co-contribution from the government for five years (2015-16 to 2019-20).
- Tax Benefits: Subscribers are eligible for tax benefits, similar to those available under the National Pension System (NPS), including deductions on contributions and exemptions on annuity purchase.
Procedure to Open an APY Account
- Visit Bank/Post Office: Approach the branch where you hold a savings account, or open a new savings account if you don’t have one.
- Provide Details: Submit your savings bank account number/post office savings account number and fill out the APY registration form with the help of the staff.
- Aadhaar and Mobile Number: While optional, providing these details will help in receiving periodic updates.
- Ensure Account Balance: Maintain the required balance for auto-debit of monthly, quarterly, or half-yearly contributions.
Contribution Payment Process
Subscribers can contribute monthly, quarterly, or half-yearly via an auto-debit from their savings bank or post office savings account. The contribution amount depends on the subscriber’s age and the desired monthly pension. Contributions can be made on any day of the first month of the period (month, quarter, or half-year).
Handling Defaults
If a subscriber fails to maintain the required balance, overdue contributions will accumulate along with interest charges. The interest is Rs. 1 per month for every Rs. 100 delayed. Accumulated overdue interest remains part of the subscriber’s pension corpus.
In cases where the subscriber’s account reaches a zero balance due to maintenance charges and overdue interest, the government’s co-contribution will be returned to the government.
Withdrawal Process from APY
- At Age 60: The subscriber can withdraw the guaranteed monthly pension or higher (depending on the investment returns). In the event of the subscriber’s death, the spouse is entitled to the same pension.
- Death After 60: Upon the death of both the subscriber and spouse, the accumulated pension wealth will be returned to the nominee.
- Before Age 60: If a subscriber wishes to exit the scheme before 60, only their contributions and the net income on these contributions will be returned. The government co-contribution will not be refunded.
- Death Before Age 60: In this case, the spouse can either continue the contributions or receive the accumulated corpus.
Other Important Points
- It is mandatory to nominate someone for the APY account. For married subscribers, the spouse is the default nominee.
- A subscriber can only open one APY account.
- Pension amounts can be changed once a year.
- Periodic updates and statements are sent to subscribers via SMS and physical mail.
- The scheme is available exclusively for Indian citizens.