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Atal Pension Yojana, a retirement plan for all

Author: Team Finapolis/Sunday, March 25, 2018/Categories: Financial Planning

Atal Pension Yojana, a retirement plan for all

A recent survey revealed that as of May 2015, only 20% of India’s population had a pension scheme of any kind. The Atal Pension Yojana was introduced in Budget 2015-16 as a step towards inclusion of the unorganized sector in the National Pension Scheme (NPS).

Any Indian citizen, between the age of 18 and 40 years can apply for the scheme. A savings bank account is a prerequisite for applying for the Atal Pension Yojana. The scheme, which took off from June 1, 2015, has several benefits. It offers fixed pension for its subscribers. Depending upon the age of the subscriber, a pension amount between Rs 1,000 and Rs 5,000 can be received.  

The amount of money payable towards the scheme is lower if you join at an early age. It goes on increasing as your age increases. With 40 years being the latest age to join, it gives one ample time to build a sufficient corpus in 18-20 years till retirement.

Upon the death of the subscriber, the pension amount is given to the spouse. In the event of the death of the subscriber as well as the spouse, the accumulated corpus is returned to the subscriber’s nominee.

The Atal Pension Yojana is a great instrument to provide security to its subscribers in old age. It also inculcates the habit of saving money among the lower middle class and poor strata of society.

Another unique benefit offered by this scheme for its subscribers is that every year for a period of 5 years after joining the scheme, the government contributes 50% of the user’s contribution or Rs 1,000, whichever is less. This benefit, however, is restricted to only those subscribers who do not pay income tax.

The Atal Pension Yojana (APY) is said to have addressed income security for 88% of the labour force from the unorganised sector. It will also encourage the labour class to join the National Pension Scheme (NPS).

Those who have previously subscribed to other pension schemes offered to the unorganized sector such as the Swavalamban Scheme, their accounts will be automatically migrated to the Atal Pension Yojana unless they wish to opt out of the central pension scheme. 

In tandem with the Atal Pension Yojana, the government recently launched two more schemes. The Pradhan Mantri Suraksha Bima Yojana and the Pradhan Mantri Jeevan Jyoti Bima Yojana are insurance schemes which are meant to benefit the large part of India’s population who do not have a cover of any kind.

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