Navigating the maze that is personal finance

Friday, 13 January 2017

Atal Pension Yojana (APY): All that you need to know

During my research on personal finance I have come across many financial schemes which are not applicable to me. Atal Pension Yojna is one such scheme that addresses the needs of those with no social security and who fall under the low income group. The aim of this scheme is to help develop a social security backbone to enable weaker sections of our society live a financially secure life in their old age by making a small contribution today.

You too can help those who help us in our daily lives. All you have to do is take a print out of the information below and hand it over to your helpers, maids, gardeners, drivers, milk man, laundry man and others.

What is Atal Pension Yojana and who are eligible?

  • It is a social security scheme, providing guaranteed pension after the age of 60 years.
  • It is available to anyone who is an Indian citizen and is working in the unorganized sector.
  • It can be opened by a person who has completed 18 years of age and is below 40 years presently (may be increased to 50) at any public sector bank.
  • They must have a bank account and a mobile phone number registered in the account to enable them to enroll for APY.
  • The person enrolling should fall in the non-tax payer slab.
Exclusion criterion
  • Any person enjoying cover of any other social security scheme does not qualify for the same e.g. those covered under EPF and other PFs such as that of J&K, or seamen’s PF etc.
Fund manager
  • PFRDA (Pension Fund Regulatory and Development Authority) is the fund manager for APY.
Pension amount
  • One can get Rs. 1000,2000,3000,4000 or 5000 as pension depending on the contribution made. Presently maximum pension one can get is Rs. 5000. But the slab may be increased in future (proposed to be increased to Rs.10000).
Years of contribution
  • Presently minimum period for contribution is 20 years before pension can be started.
Early bird offer
  • For those who opened account between 1st June 2015 - 31st Dec 2015 will be benefited by contribution from the government till 2019. The contribution amount would be Rs. 1000 or 50% of total contribution whichever is lower.
Mode of contribution
  • The amount would be auto deducted from the savings account monthly. It is therefore important to maintain the minimum balance in the account to prevent default.
  • In case of default the bank can recover amount whenever there is sufficient balance in the account.
  • All subscribers will get automatic SMS alerts regarding contributions debited and balance in their account.
Payment date
  • Date of first contribution would be taken as the due date for every subsequent month and is not subject to change.
Switching contribution
  • The subscribers can opt to decrease or increase pension amount during the course of accumulation phase, as per the available monthly pension amounts.
  • However, the switching option shall be provided once in year during the month of April.
How to enroll
  • Fill the form of Atal Pension Yojana in your bank.
  • Complete your details with Aadhaar if already enrolled (this helps in completion of KYC).
  • Provide your account details and phone number.
  • Each subscriber will be provided with an acknowledgement slip after joining APY which would invariably record the guaranteed pension amount, due date of contribution payment, PRAN (Permanent Retirement Account Number) etc.
Closure of account
An APY account can be voluntarily closed if the subscriber desires to do so now. Earlier it was mandatory to remain subscribed. The following have been described by PRFDA. (source NSDL)

Exit in case of death of the Subscriber:
In case, the Subscriber dies before the age of 60 years, there are two options:
  1. Closure of APY account– account will be closed and amount settled to spouse (in case the spouse wishes to close the account) or nominee.
  2. Continuation of APY account (only for Spouse) – The spouse would have an option to continue contributing to APY accounts of the subscriber, which can be maintained in the spouse's name, for the remaining vesting period, till the original subscriber would have attained the age of 60 years. The spouse of the subscriber shall be entitled to receive the same pension amount as that of the subscriber until the death of the spouse.
Premature Exit before the age of 60 years:
In case of exit before 60 years, there are two options:
  1. Exit due to specified illness – Exit before 60 years of age may be permitted only in exceptional circumstances such as due to specified illness of the subscriber and the accumulated corpus (subscriber contribution, government contribution and the returns thereon) in the subscriber's account will be returned to the subscriber.
  2. Voluntary exit - In case a subscriber chooses to voluntarily exit from APY before attaining 60 years of age, he/she will be refunded only the contributions made by him/her to APY along with the returns thereon after deducting the account maintenance, investment management etc. charges. The government co-contribution, if any and the accrued income earned on the government co-contribution will not be given to such subscribers.

Default scenario
The subscriber’s savings bank account needs to maintain a minimum balance on the specified date which is equal to the one month’s contribution amount. In case the amount found to be lower than the required, the account will be labelled as default. Banks are given the authority of penalizing those account holders by charging fine on them. The fine amount can be anything between one rupee to ten rupees as the details mentioned below:
  • If the contribution amount is Rs. 100/- per month, the fine charged would be one rupee per mont.
  • For contribution amount from Rs. 101 to 500/- per month, the two rupees per month would be fined.
  • For Rs. 501/- to 1000/- per month, there will be Rs. 5/- per month fine.
  • Rs.10 per month would be fined for the contribution above Rs. 1000/- per month.
  • If for any reason, the payments get discontinued, the account would be frozen after the six months, deactivated after twelve months and would be completely closed after twenty four months.  Government co-contributions, if any shall be forfeited in such cases.
Therefore, it is solely the subscriber’s responsibility to fund the account on the due date of contribution, to avoid penalties in the future.

Below is a table which gives all the important details of the scheme(Source:http://www.pradhanmantriyojana.co.in/atal-pension-yojana-apy/)

Sl. No. Scheme fields Relevant details

1
Type of scheme Pension scheme (Under the PFRDA)

2
Date of effect of scheme 1st June, 2015

3
Age for eligibility to join 18 years to 40 years

4
Time of maturity of pension scheme When the beneficiary attains 60 years of age

5
Targeted group of beneficiaries Employees of unorganized sectors, farmers, backward masses, women,
SC/ST etc.

6
Inclusion of members of Swavalamban Yojana NPS Lite Automatic inclusion

7
Pension amount options Rs. 1,000, Rs. 2,000, Rs. 3,000, Rs. 4,000 and Rs. 5,000

8
Government’s contribution to the scheme 50 per cent of beneficiary’s contribution or Rs. 1,000 per year
for 5 years

9
Eligibility to get Govt. contribution Must be non tax payer and must join APY before Dec. 2015

10
Mode of monthly payment to APY account Auto debit process from the bank account linked with APY account

11
Where to apply for the APY scheme? All nationalized banks

12
Nomination facility Available

13
Non payment for 6 months Account frozen

14
Non payment for 12 months Account deactivated

15
Non payment for 24 months Account permanently closed

16
Online download APY application form http://www.jansuraksha.gov.in/FORMS-APY.aspx

17
Premature exit from scheme Yes you can now do a premature exist. Will have to pay some fine.
Fine amount is yest not clear.

18
Total number of APY accounts opened so far 2,405,268 (As on 16th April 2016)

Table of contribution levels, fixed monthly pension of Rs. 1,000 per month to subscribers and his spouse and return of corpus to nominees of subscribers and the contribution period under Atal Pension Yojana

Age of
Joining
Years of
Contribution
Indicative Monthly
Contribution(in Rs.)
Monthly Pension
to the subscribers
and his spouse
(in Rs.)
Indicative Return of
Corpus to the
nominee of
the subscribers (in Rs.)
18 42 42 1,000 1.7 Lakh
20 40 50 1,000 1.7 Lakh
25 35 76 1,000 1.7 Lakh
30 30 116 1,000 1.7 Lakh
35 25 181 1,000 1.7 Lakh
40 20 291 1,000 1.7 Lakh

Table of contribution levels, fixed monthly pension of Rs. 2,000 per month to subscribers and his spouse and return of corpus to nominees of subscribers and the contribution period under Atal Pension Yojana

Age of
Joining
Years of
Contribution
Indicative Monthly
Contribution(in Rs.)
Monthly Pension
to the subscribers
and his spouse
(in Rs.)
Indicative Return of
Corpus to the
nominee of
the subscribers (in Rs.)
18 42 84 2,000 3.4 Lakh
20
40 100
2,000 3.4 Lakh
25 35 151 2,000 3.4 Lakh
30 30 231 2,000 3.4 Lakh
35 25 362 2,000 3.4 Lakh
40 20 582 2,000 3.4 Lakh

Table of contribution levels, fixed monthly pension of Rs. 3,000 per month to subscribers and his spouse and return of corpus to nominees of subscribers and the contribution period under Atal Pension Yojana

Age of
Joining
Years of
Contribution
Indicative Monthly
Contribution(in Rs.)
Monthly Pension
to the subscribers
and his spouse
(in Rs.)
Indicative Return of
Corpus to the
nominee of
the subscribers (in Rs.)
18 42 126
3,000 5.1 Lakh
20
40 150
3,000 5.1 Lakh
25 35 226 3,000 5.1 Lakh
30 30 347 3,000 5.1 Lakh
35 25 543 3,000 5.1 Lakh
40 20 873
3,000 5.1 Lakh

Table of contribution levels, fixed monthly pension of Rs. 4,000 per month to subscribers and his spouse and return of corpus to nominees of subscribers and the contribution period under Atal Pension Yojana

Age of
Joining
Years of
Contribution
Indicative Monthly
Contribution(in Rs.)
Monthly Pension
to the subscribers
and his spouse
(in Rs.)
Indicative Return of
Corpus to the
nominee of
the subscribers (in Rs.)
18 42 168
4,000 6.8 Lakh
20
40 198
4,000 6.8 Lakh
25 35 301 4,000 6.8 Lakh
30 30 462 4,000 6.8 Lakh
35 25 722 4,000 6.8 Lakh
40 20 1164
4,000 6.8 Lakh

Table of contribution levels, fixed monthly pension of Rs. 5,000 per month to subscribers and his spouse and return of corpus to nominees of subscribers and the contribution period under Atal Pension Yojana

Age of
Joining
Years of
Contribution
Indicative Monthly
Contribution(in Rs.)
Monthly Pension
to the subscribers
and his spouse
(in Rs.)
Indicative Return of
Corpus to the
nominee of
the subscribers (in Rs.)
18 42 210
5,000 8.5 Lakh
20
40 248
5,000 8.5 Lakh
25 35 376 5,000 8.5 Lakh
30 30 577 5,000 8.5 Lakh
35 25 902 5,000 8.5 Lakh
40 20 1454
5,000 8.5 Lakh

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