The Government of India is extremely concerned about the old age income security of the working poor and is focused on encouraging and enabling them to join the National Pension System (NPS). To address the longevity risks among the workers in unorganised sector and to encourage the workers in unorganised sector to voluntarily save for their retirement, who constitute 88% of the total labour force of 47.29 crore as per the 66th Round of NSSO Survey of 2011-12, but do not have any formal pension provision, the Government had started the Swavalamban Scheme in 2010-11. However, coverage under Swavalamban Scheme is inadequate mainly due to lack of clarity of pension benefits at the age after 60.
Therefore GOI announced a new initiative called Atal Pension Yojana (APY) in 2015-16. The APY will be focussed on all citizens in the unorganised sector, who join the National Pension System (NPS) administered by the Pension Fund Regulatory and Development Authority (PFRDA) and who are not members of any statutory social security scheme. Under the APY, the subscribers would receive the fixed pension of Rs. 1000 per month, Rs. 2000 per month, Rs. 3000 per month, Rs. 4000 per month, Rs. 5000 per month, at the age of 60 years, depending on their contributions, which itself would vary on the age of joining the APY. The minimum age of joining APY is 18 years and maximum age is 40 years. Therefore, minimum period of contribution by the subscriber under APY would be 20 years or more. The benefit of fixed pension would be guaranteed by the Government. 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 APY would be launched from 1st June, 2015. The existing subscribers of Swavalamban Scheme would be automatically migrated to APY, unless they opt out.
Benefit of APY: Fixed pension for the subscribers ranging between Rs. 1000 to Rs. 5000, if he joins and contributes between the age of 18 years and 40 years. The contribution levels would vary and would be low if subscriber joins early and increase if he joins late.
Eligibility for APY: Atal Pension Yojana (APY) is open to all bank account holders who are not members of any statutory social security scheme.
Age of joining and contribution period: The minimum age of joining APY is 18 years and maximum age is 40 years. Therefore, minimum period of contribution by the subscriber under APY would be 20 years or more.
Focus of APY: Mainly targeted at unorganised sector workers.
Enrolment and Subscriber Payment: All bank account holders under the eligible category may join APY with auto-debit facility to accounts, leading to reduction in contribution collection charges.
Enrolment agencies: All Points of Presence (Service Providers) and Aggregators under Swavalamban Scheme would enrol subscribers through architecture of National Pension System.
Operational Framework of APY: It is Government of India Scheme, which is administered by the Pension Fund Regulatory and Development Authority. The Institutional Architecture of NPS would be utilised to enrol subscribers under APY.
Funding of APY: Government would provide
(i) fixed pension guarantee for the subscribers;
(ii) would co-contribute 50% of the subscriber contribution or Rs. 1000 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.
Therefore GOI announced a new initiative called Atal Pension Yojana (APY) in 2015-16. The APY will be focussed on all citizens in the unorganised sector, who join the National Pension System (NPS) administered by the Pension Fund Regulatory and Development Authority (PFRDA) and who are not members of any statutory social security scheme. Under the APY, the subscribers would receive the fixed pension of Rs. 1000 per month, Rs. 2000 per month, Rs. 3000 per month, Rs. 4000 per month, Rs. 5000 per month, at the age of 60 years, depending on their contributions, which itself would vary on the age of joining the APY. The minimum age of joining APY is 18 years and maximum age is 40 years. Therefore, minimum period of contribution by the subscriber under APY would be 20 years or more. The benefit of fixed pension would be guaranteed by the Government. 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 APY would be launched from 1st June, 2015. The existing subscribers of Swavalamban Scheme would be automatically migrated to APY, unless they opt out.
Benefit of APY: Fixed pension for the subscribers ranging between Rs. 1000 to Rs. 5000, if he joins and contributes between the age of 18 years and 40 years. The contribution levels would vary and would be low if subscriber joins early and increase if he joins late.
Eligibility for APY: Atal Pension Yojana (APY) is open to all bank account holders who are not members of any statutory social security scheme.
Age of joining and contribution period: The minimum age of joining APY is 18 years and maximum age is 40 years. Therefore, minimum period of contribution by the subscriber under APY would be 20 years or more.
Focus of APY: Mainly targeted at unorganised sector workers.
Enrolment and Subscriber Payment: All bank account holders under the eligible category may join APY with auto-debit facility to accounts, leading to reduction in contribution collection charges.
Enrolment agencies: All Points of Presence (Service Providers) and Aggregators under Swavalamban Scheme would enrol subscribers through architecture of National Pension System.
Operational Framework of APY: It is Government of India Scheme, which is administered by the Pension Fund Regulatory and Development Authority. The Institutional Architecture of NPS would be utilised to enrol subscribers under APY.
Funding of APY: Government would provide
(i) fixed pension guarantee for the subscribers;
(ii) would co-contribute 50% of the subscriber contribution or Rs. 1000 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.
Analysis of Scheme
(a) There is lukewarm response for the Atal Pension Yojana (APY). The poor response to pension scheme is symptomatic of the general mindset of the people who do not take retirement planning seriously,
(b) It is not a surprise that APY is not doing well as the previous generation depended on their children to help them tide over old age and did little retirement planning. The present generation has not woken up to the reality of retirement which is considered a distant future and hence tend to ignore it
(c) This scheme will benefit non-tax payers and those who are not yet covered under a social security scheme. But for most of those living in urban areas, a pension of Rs5,000 per month will be insufficient. For example, for a 40-year old who will have 20 years till retirement, a pension of Rs5,000 will be worth just Rs1,292 i.e. Rs40 per day. This is assuming a rate of inflation of 7%. We all know that the rate of inflation will be much higher in urban areas. For a younger person of 25 years and assuming an inflation rate of 9%, the pension of Rs5,000 per month at the time of retirement will work out to just Rs245 per month.
(a) There is lukewarm response for the Atal Pension Yojana (APY). The poor response to pension scheme is symptomatic of the general mindset of the people who do not take retirement planning seriously,
(b) It is not a surprise that APY is not doing well as the previous generation depended on their children to help them tide over old age and did little retirement planning. The present generation has not woken up to the reality of retirement which is considered a distant future and hence tend to ignore it
(c) This scheme will benefit non-tax payers and those who are not yet covered under a social security scheme. But for most of those living in urban areas, a pension of Rs5,000 per month will be insufficient. For example, for a 40-year old who will have 20 years till retirement, a pension of Rs5,000 will be worth just Rs1,292 i.e. Rs40 per day. This is assuming a rate of inflation of 7%. We all know that the rate of inflation will be much higher in urban areas. For a younger person of 25 years and assuming an inflation rate of 9%, the pension of Rs5,000 per month at the time of retirement will work out to just Rs245 per month.
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