The Atal Pension Yojana (APY) is a fixed pension scheme set up by the Government of India under the National Pension System (NPS). It is separate from the regular NPS schemes under which you allocate your money between equity, government bonds and corporate bonds.

You pay a specified amount (refer to the table below) and receive a pension ranging from Rs 1,000-5,000 depending on your contributions. You can join between the ages of 18 and 40. Joining at the age of 18 implies a contribution period of 42 years whereas joining at the age of 40 implies a contribution period of 20 years. However, the amounts are correspondingly adjusted for these ages of joining. You will start receiving your pension at the age of 60. It will be paid to your spouse (if any) on your death. Upon the death of your spouse, the corpus is returned to your nominee.

Advantages

  • The APY pension is guaranteed. It is not linked to the market unlike mutual funds, stocks or even some of the allocations permitted by the regular NPS.
  • The APY allows you to save small amounts as mentioned in the table below.
  • The government will co-contribute 50% of the subscriber’s contribution or Rs 1,000, whichever is lower for a period of five years from the subscriber’s year of joining. However, this only applies if the subscriber is not an income taxpayer or a beneficiary of any other social security scheme.
  • You can make monthly contributions to your APY account which are directly debited from the account.

Disadvantages

  • The maximum pension is fixed at Rs 5000.
  • There is no tax benefit on the contribution or on the pension payment.
  • There is no equity allocation and hence no scope for long-term capital growth.
  • You have to maintain the periodic contributions that you have signed up for. Delay in making them will attract penalties from the banks collecting the contributions. After 6 months, the account is frozen and after 12 months, it is closed.

How to open an account

You can complete the entire account opening process online here if you have an account with HDFC Bank, Bank of India, Indian Bank, Bank of Maharashtra, Corporation Bank, Andhra Bank, Punjab National Bank, Sarva Haryana Gramin Bank, Allahabad Bank, Saurashtra Grameen Bank or Andhra Pradesh Grameen Vikas Bank.

You must also have an Aadhar Number and mandatorily provide a nominee. In case of death of the subscriber before the age of 60 years, the accumulated corpus is paid out to the nominee.

Alternatively, you can complete this process offline with your nearest Point-of-Presence (PoP). You can locate it here. You must have an Aadhar number and a savings bank account.

Monthly contributions and pension payable:

Age of Entry Years of Contribution Monthly payment for pension of Rs. 1000 and Indicative return of corpus to the nominee of Rs1.7 Lakh.

(Rs)

Monthly payment for pension of Rs. 2000 and indicative return of corpus to the nominee of Rs.3.4 Lakh.

(Rs)

Monthly payment for pension of Rs. 3000 and indicative return of corpus to the nominee of Rs.5.1 Lakh.

(Rs)

Monthly payment for pension of Rs. 4000 and indicative return of corpus to the nominee of Rs.6.8 Lakh

(Rs).

Monthly payment for pension of Rs. 5000 and indicative return of corpus to the nominee of Rs.8.5 Lakh.

(Rs)

18 42 42 84 126 168 210
19 41 46 92 138 183 228
20 40 50 100 150 198 248
21 39 54 108 162 215 269
22 38 59 117 177 234 292
23 37 64 127 192 254 318
24 36 70 139 208 277 346
25 35 76 151 226 301 376
26 34 82 164 246 327 409
27 33 90 178 268 356 446
28 32 97 194 292 388 485
29 31 106 212 318 423 529
30 30 116 231 347 462 577
31 29 126 252 379 504 630
32 28 138 276 414 551 689
33 27 151 302 453 602 752
34 26 165 330 495 659 824
35 25 181 362 543 722 902
36 24 198 396 594 792 990
37 23 218 436 654 870 1,087
38 22 240 480 720 957 1,196
39 21 264 528 792 1,054 1,318

 

Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.