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Decoding the Atal Pension Yojana

  • Highlights

  • Helps unorganised sector employees save for retirement

  • The Atal Pension Yojana has a simple application process

  • The earlier you join in, the higher pension you can get

  • It is ideal for investors between 18 and 40 years of age

Started in June 2015, the Atal Pension Yojanais an outcome of the government’s effort to ensure that the unorganised workforce of the nation has income security at retirement. As per the figures at the end of the financial year 2017¬–2018, this scheme has a registered base of 97.05 lakh people.

What is the Atal Pension Yojana?

Although the government was slightly short of meeting its goal of having 1 crore people as part of Atal Pension Yojana, it has made a significant difference to the lives of over 97 lakh people. The Atal Pension Yojanamakes for a smart investment option if you worked in the unorganised sector, which makes up 88% of the nation’s labour force.
Administered by the Pension Fund Regulatory and Development Authority, you can apply for this scheme if you are working in the private sector, and even if you are self-employed. It can help you save sufficiently for your sunset years and finance your post-retirement lifestyle.

How does this investment scheme work?

In lieu of monthly contributions made by you and the government (amounting to 50% of your contribution or Rs.1,000 annually, whichever is lower), you can get a minimum monthly pension ranging from Rs.1,000 to Rs.5,000.The government guarantees this minimum amount.

Why should you sign up for Atal Pension Yojana?

Once you retire, you will have to rely on your savings to meet everyday expenses. Giventhe absence of a regular income, you must plan in advance to build a retirement corpus. One easy way of doing this is partaking in Atal Pension Yojana. By making regular contributions not only will you be able to save adequately for retirement, you will also be able to inculcate a savings and investment habit.

What is the operational framework of the APY?

- This scheme falls under the Government of India.
- However, the Pension Fund Regulatory and Development Authority (PFRDA) administers it.
- The architecture of the National Pension Scheme is used to enrol subscribers under Atal Pension Yojana.
- The offer document, as well as the account opening form is drafted by the PFRDA.

How does Atal Pension Yojana work?

Before you apply for this scheme take a look at how it works.
- You need to contribute on a monthly basis for a period of at least 20 years. Your contributions can range from Rs.42 to Rs.210 per month.
- You can choose from Rs.1,000 to Rs.5,000 (in intervals of Rs.1,000) as your minimum pension amount when you sign up.
- Your contribution will be auto-debited from your bank account if you instruct the bank to facilitate this. This is a convenient optional feature, as it allows you to invest regularly without any added hassle.
- You can select monthly, quarterly or yearly contributions. Remember, the more you contribute, the more you can avail as pension.
- You will start receiving this amount once you reach the age of 60 years. In the event of your death the amount will be handed over to your spouse. In the event of the death of both you and your spouse, your nominee will receive this amount.
- This scheme is available with every bank. To enrol you can visit a branch where you have an account and request a form.

3 main elements about Atal Pension Yojana

Now that you know of what the scheme is and how it works, keep these facts about the Atal Pension Yojanain mind.
- Bank account: To avail the benefits of this scheme, it is important for you to have proof of Indian nationality, as well as an Indian bank account.
- Progressive contribution: This is an interesting feature that helps you invest as much as you can afford to. The amount that you have to contribute increases with your age. As per the scheme, the minimum contribution amount is also lower when you are younger and increases as you grow older and as your income increases. So, if you join at the age of 18, you will have to invest a minimum of Rs.42, but, if you join at a later date, the amount will be higher. This rule is designed to help you build significant wealth by the time you reach retirement age.
- Government contribution: The government will contribute to your investment only if you aren’t covered by any Statutory Social Security Scheme and you are not a taxpayer. Besides, the government’s contribution is limited only to the first 5 years, if you have registered for this scheme by December 31, 2015.

What are the eligibility criteria to invest in APY?

To qualify for APY you must meet certain basic requirements. So, take a look at theAtal PensionYojanaeligibility criteria that you need to fulfil in order to participate in this scheme.
- You must be between the ages of 18 and 40 years.
- To qualify for this scheme you also need to submit your Aadhaar number and ideally, your mobile number too. You can also submit Aadhaar details at a later date if you don’t have an Aadhaar card.
- You must have an active bank account.
Remember, you shouldn’t be a part of any other social security scheme or a company-provided scheme to qualify for APY.

How to apply for investment in APY?

Applying for Atal Pension Yojana is a simple procedure. Depending on what is convenient, you can either apply online or offline.
Online procedure:
- All nationalised banks are known to provide this scheme. You can use a net banking account of your bank or you may download the form from the Atal Pension Yojana official website.
- Then, simply select this scheme, fill in the necessary information and enable the auto-debit option if you wish to.
-The amount will be deducted regularly until you reach 60 years of age.
Offline procedure:
- Visit the bank or post office where you have an account and get the application form. If you don’t have a bank account, open one first. You can also download this form and print it.
- Fill up the form and submit it along with the relevant information that includes a copy of your Aadhaar card and your phone number.

What is the Atal Pension Yojana calculator?

Since the scheme gives you returns based on certain calculations, you can make use of the Atal Pension Yojana calculator to see what your net gain will be.Based on when you join, and the amount you seek on a monthly basis, you can study the tables published by the PFRDA. They have a separate chart for each amount. For example, if you want Rs.3,000 a month, refer to this chart to understand how much you must contribute if you join at the age of 18, 20, 25, 30, 35 and 40.

What are the fees and charges applicable on the APY?

You don’t have to pay any charges to grow or maintain yourinvestment. However, you must be aware of the penalties that you will have to pay in case you skip making a contribution or don’t have enough balance in your account for the auto-debit.Take a look at the schedule of default charges.
- If your contributionis under Rs.100, you will have to pay Rs.1 per month.
- If your contribution isbetween Rs.101 and Rs.500 per month, you will have to pay Rs.2 per month.
- If your contribution is between Rs.501 and Rs.1,000 per month, you will have to pay Rs.5 per month.
- If your contribution is more than Rs.1,001 per month, you will have to pay Rs.10 per month.

Can you make withdrawals from the APY account?

The Atal Pension Yojana accountprovides you returns once you turn 60 years old.However, this investment scheme does not give you the option to withdraw your funds prematurely. Only in event of deathwill this be allowed.

What are the differences between Atal Pension Yojana and National Pension Scheme?

Both schemes are targeted towards helping you save funds for your retirement. However, there are various points of difference between both. It is important to understand them so that you can choose a plan that suits you most.
Difference in eligibility:Both these plans vary as far as eligibility criteria goes. While the NPS has a minimum age requirement of 18 years and a maximum age limit of 55 years, Atal Pension Yojana is only for individuals between the ages of 18 and 40 years. Also, you can only apply for Atal Pension Yojana if you are an Indian citizen. However, you can apply for NPS even if you are a non-resident.
Difference in returns:The Atal Pension schemeis designed to offer you guaranteed pension after retirement. However, the National Pension Scheme does not guarantee a pension. Also, when you choose NPS you can select an investment of your choice. On the other hand, APY doesn’t give you this feature.
Difference in type of account:The Atal Pension Yojanaoffers just one type of account. However, the National Pension Scheme offers you a choice to select either a Tier I or a Tier II account.
Difference in premature withdrawal:Premature withdrawal, or even lump sum withdrawal for that matter is not allowedas per Atal Pension Yojana’s guidelines. Only in case of your death before the age of 60 years will this amount be disbursed to your spouse/nominee from your Atal Pension Yojana account. However, when you opt for NPS, you can make partial withdrawals with a Tier I account, and as many withdrawals as you wish to if you have a Tier II account.
Difference in government: contribution:While the government may help you invest in theAtal Pension Yojana scheme, when you choose NPS, the entire investment contribution is yours. The government doesn’t make a monetary contribution.

What schemes should you invest in to plan your post-retirement life?

Planning your post-retirement savings is a key step to ensuring that you have a secure future. Given the vast range of investment options, each one has something different to offer.
Here are some of the stable investment options that you can choose from.

Company fixed deposits: This is a classic form of investment that helpsyou grow your funds steadily. Since it isn’t linked to the market, you can be assured of getting returns when you choose a reliable fixed deposit provider. Picking one from an NBFC will offer you better returns as compared to one from a bank.
Also, you can choose a fixed deposit that has non-cumulative interest rate. This way you can get returns at regular intervals, either monthly, quarterly, bi-annually or annually, to finance post-retirement life.If you choose the monthly option, returns from your fixed deposit will mimic your salary.

Government schemes:Like the Atal Pension Yojana, there are several other government investment schemes that you can choose from such asthe Senior Citizens Savings Scheme, Post Office Monthly Income Schemes and government tax bonds amongst others. Since they are backed by the government they are completely safe.

Recurring deposits:This is a type of a deposit that is ideal if you are saving forretirement while you are working. It involves adding a fixed sum to an account each month for a specified tenor. However, note that fixed deposits offer better returns as compared to recurring deposits.
This concludes all that you need to know about Atal Pension Yojana. Having this information will help you make a wise decision and ensure that the investment option matches your needs.

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