The Atal Pension Yojana (APY), launched by the Union government in 2015, aims to offer financial security to individuals in the unorganised sector upon retirement. This pension scheme is particularly beneficial for those who are not income taxpayers. It enables them to invest a modest amount regularly and receive a fixed pension upon retirement.
Eligibility and Contributions
The APY is available to Indian citizens aged 18 to 40 who do not pay income tax. Those who are already tax-payers have been ineligible since October 2022. Subscribers contribute a nominal premium regularly—monthly, quarterly, or half-yearly—until the age of 60. After reaching this age, they receive a monthly pension ranging from Rs 1,000 to Rs 5,000, depending on their contributions.
For example, a contribution of Rs 42 per month from the age of 18 can yield a pension of Rs 1,000, while Rs 1,454 per month from age 40 can provide Rs 5,000.
Advantages of APY
- Government-Guaranteed Pension: APY offers a pension guaranteed by the government, which ensures a fixed income after retirement.
- Lifetime Benefits: Subscribers receive a fixed pension until death, with the same amount continuing for their spouse after their demise.
- Return of Corpus: Upon the death of both the subscriber and spouse, the accumulated corpus with interest is returned to the nominee.
Comparison with Other Options
APY stands out for its affordability and government guarantee. For instance, an individual contributing Rs 210 per month from age 18 can receive a monthly pension of Rs 5,000, compared to similar annuity products from life insurers which provide around Rs 4,500 for a similar corpus.
Investment Management
The contributions are managed by three pension fund managers: LIC Pension Fund, SBI Pension Fund, and UTI Pension Fund. These funds are divided among conservative hybrid portfolios, investing up to 15% in equities and the rest in debt and money market instruments. As of July 2024, these funds collectively manage around Rs 39,000 crore. The government guarantees returns if market conditions cause shortfalls, and the funds have shown a compound annual growth rate (CAGR) between 9.1% and 9.4% since inception.
Tax Benefits
While income taxpayers are not eligible to open new APY accounts as of October 2022, existing subscribers who were non-taxpayers at the time of registration can still avail of tax benefits. Contributions to APY are eligible for tax deductions under Section 80CCD(1) and Section 80CCD(1B) of the Income-tax Act, although pension payouts are taxed according to the subscriber’s income tax slab.
How to Apply
APY accounts can be opened both online and offline through nationalised and major private banks, post offices, and the eNPS portal. Auto-debit facilities are available for convenience. Investors can track their accounts using the “APY and NPS Lite” mobile app.
The APY offers a reliable and affordable pension scheme for those in the unorganised sector, with benefits that include a government-guaranteed pension, lifetime income for both the subscriber and their spouse, and a return of corpus. It remains an attractive option, particularly when compared to other retirement investment products.
