Finance Minister Piyush Goyal in his Budget 2019 speech has proposed to launch a mega pension yojana namely ‘Pradhan Mantri Shram-Yogi Maandhan’ (PMSYM) for the unorganised sector workers.
There are two other prominent pension schemes in the market – National Pension System (NPS) and Atal Pension Yojana (APY). While NPS is a defined contribution pension plan, the APY is similar to PMSYM, both being defined benefit pension plans. NPS is a market-linked pension plan in which amount of pension is determined by the amount the amount one saves.
In case of PMSYM and APY, there is fixed pension amount. APY and PMSYM returns are assured and fixed but unfortunately it comes with an investment cap and also has a cap on the pension amount.
Pradhan Mantri Shram-Yogi Maandhan ( PMSYM)
This pension yojana will be for those workers who have monthly income upto Rs 15,000 and the scheme will provide them an assured monthly pension of Rs 3,000 from the age of 60 years on a monthly contribution during their working age. An unorganised sector worker joining pension yojana at the age of 29 years will have to contribute only Rs 100 per month till the age of 60 years. A worker joining the pension yojana at 18 years, will have to contribute as little as Rs 55 per month only. The Government will deposit equal matching share in the pension account of the worker every month.
Atal Pension Yojana (APY)
Atal Pension Yojana (APY), a pension scheme for citizens of India is focussed on the unorganised sector workers. Under the APY, guaranteed minimum pension of Rs.1,000, Rs.2,000, Rs.3,000, Rs.4,000 and Rs.5,000 per month will be given at the age of 60 years depending on the contributions by the subscribers. Guaranteed minimum pension of Rs Rs.1,000, Rs.2,000, Rs.3,000, Rs.4,000 and Rs.5,000 per month will be given at the age of 60 years depending on the contributions by the subscribers.On attaining the age of 60 years, The exit from APY is permitted at the age with 100% annuitisation of pension wealth. On exit, pension would be available to the subscriber.
As per the indicative illustration of the scheme avaialbe on APY’s website, if a person chooses the Rs 5,000 per month guaranteed pension option, then he would have to contribute between Rs 210 and Rs 1,454 per month (depending upon the age of entry into the scheme) till the age of 60. Following his death, the pension amount goes to his spouse, and later the corpus (about Rs 8.5 lakh) goes to the nominee, if the spouse has died as well.
According to PFRDA, “At a time when the interest rate on various financial instruments including savings bank is declining, Atal Pension Yojana as a pension scheme offers a guaranteed rate of 8 per cent assured return for the subscribers and also the opportunity of higher earnings in case the rate of return is higher than 8 per cent at the time of maturity after staying invested in the scheme for 20-42 years.”
National Pension System (NPS)
NPS is a voluntary, defined contribution retirement savings scheme and is different from PMSYM and APY. In NPS, neither the growth is assured nor the pension amount. The contributions are invested in equities or debt or a mix of both. Government had also introduced an alternate model known as NPS-Lite having relatively low cost structure compared to government sector and all citizens of India and targeted at unorganised workers. The self help groups (Aggregators), Government (Central and/or State) co-sponsored schemes (GCS), government welfare and affinity groups are covered under NPS-Lite. Subscribers of NPS-Lite in the age group of 18 to 60 can join NPS-Lite through Aggregator and contribute till the age of 60.