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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 Yojana is an outcome of the government’s effort to ensure that the unorganised workforce of the nation has income security at retirement. As per latest figures, 1.08 subscribers have enlisted with the fund with Rs 4,500 crores of contributions collected so far.

What is the Atal Pension Yojana?

The Atal Pension Yojana makes 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 Atal Pension Yojana 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. The government is now reported to start three more slabs for pension where Rs. 10,000 will be the highest slab.

Contributions to this account are to be made for minimum of twenty years. You need to have a valid bank account linked to Aadhar and a registered mobile number to avail the benefits of this scheme.

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. The sooner you join, the lesser you need to pay as contribution.

  • The contribution amount depends upon the slab (Rs. 1,000, Rs. 2,000, Rs. 3,000, Rs. 4,000 or Rs. 5,000) you have chosen and time intervals for payments. The intervals available are monthly, quarterly and half-yearly.

  • 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. An operational savings account (with a bank or post-office) is essential with regular deposits.

  • 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 and post office. To enroll you can visit a branch where you have an account and request a form.

Atal Pension Yojana Benefits

Once you retire, you will have to rely on your savings to meet everyday expenses. Given the 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.

Atal Pension Yojana is the go-to retirement and pension framework for workers who do not have EPF accounts or are not paying income tax. The government contribution will be credited when both of these conditions are met. This is the most important distinction for starting this facility.

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 enroll subscribers under Atal Pension Yojana.

  • The offer document, as well as the account opening form is drafted by the PFRDA.

Pradhan Mantri Atal Pension Yojana Details: 3 Main Elements

Now that you know of what the scheme is and how it works, keep these facts about the Atal Pension Yojana in 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.

Atal Pension Yojana Eligibility Criteria

To qualify for APY you must meet certain basic requirements. So, take a look at the Atal Pension Yojana eligibility criteria that you need to fulfil in order to participate in this scheme.

  • 1. You must be between the ages of 18 and 40 years.

  • 2. 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.

  • 3. 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.

Additional Read: Atal Pension Yojana Eligibility Criteria

Atal Pension Yojana Application Form: Offline and Online

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.
    The forms are available in various regional languages as well.

  • 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.

Additional Read: How to invest in Atal Pension Yojana?

What are the fees and charges applicable on the APY?

You don’t have to pay any charges to grow or maintain your investment. 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 contribution is under Rs.100, you will have to pay Rs.1 per month.

  • If your contribution is between 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 account provides 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 death will this be allowed.

Alternatives to Atal Pension Yojana

While Atal Pension Yojana is meant for people who do not fall under the income tax bracket, you can look for other smart investment alternatives if your income falls under the taxable bracket. One such investment option is fixed deposit, which offers guaranteed returns. Company FDs such as Bajaj Finance FDs offer 1-2% higher interest rates than fixed income instruments in a bank. These deposits are ranked by CRISIL’s FAAA/Stable rating and ICRA’s MAAA/stable rating, so your investments are never at risk. This simply means you do not have to worry about not receiving your principal and interest on time.

While Atal Pension Yojana will start as a pension scheme post twenty years of deposits, you can create a Bajaj Finance FD anytime during your working life. Non-cumulative option will help you receive periodic interest payouts (monthly, quarterly, half-yearly) with immediate effect.

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 Atal Pension Yojana and National Pension Scheme. 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 scheme is 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 Yojana offers 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 allowed as 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 the Atal 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 helps you 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.

With Bajaj Finance FD you also benefit from various features which are not available anywhere else and will make your post retirement investments easy. Some of these features are:

  • 1. Auto-renew facility – This will renew your FD as per standing instructions. You do not have to wait or think on the direction of interest rates thus saving time for earning interest.

  • 2. Debit card – This facility is available in select cities where you can use your debit card to create an FD.

  • 3. Loan against FD – Emergency requirement for cash can be met by taking a loan of up to Rs. 4 lakhs against your FDs.

  • 4. Multi-deposit – This enables you to create multiple FDs with different tenors using the same lumpsum investment. It also allows you to withdraw from this lumpsum prematurely without actually breaking any FD. Even if you break one FD, the returns on other FDs will not be disturbed.

    Just like the Atal Pension Yojana, there are several other government investment schemes that you can choose from such as the 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 for retirement 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.

Additional Read: 5 best recommended investment schemes for senior citizens

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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