Pension Fund Regulatory and Development Authority has submitted a proposal regarding Atal Pension Yojana which is under examination by the Ministry of Finance and one may witness modifications in the scheme in Budget 2019 India.
Union Budget 2019 India: Atal Pension Yojana (APY), the government-sponsored pension plan primarily targeted at the unorganised section of society, may go for an overhaul in the upcoming Budget 2019-20, to make it more attractive and cater to a larger section of population. As of now, only those who are up to the age of 40 can join the scheme while the maximum monthly pension from age 60 of the APY subscriber is capped at Rs 5,000. The fixed and assured pension is guaranteed by the government of India.
However, several investors may have been put off by the maximum pension cap of Rs 5,000 and, thus, refrained from joining the APY scheme. Also, the maximum age limit of 40 years may have kept several others who wanted to join but were unable to do so because of the age mandate.
Going forward, APY may relax these conditions as the Pension Fund Regulatory and Development Authority (PFRDA) has submitted a proposal to the Ministry of Finance (MoF) to increase the limit of pension and also the age limit under Atal Pension Yojana. As per MoF, the proposals are under examination in consultation with PFRDA. It appears that the age limit may be enhanced to 50 years while the maximum pension may be doubled to Rs 10,000 a month.
Currently, APY is open to all citizens of India between 18-40 years of age. Only those who have a bank account are eligible to join APY and have to give a mandate for the auto-debit facility to their account for monthly APY contributions.
One has to keep contributing on a monthly basis towards APY till the age of 60 after which the government will start providing a lifetime pension to the subscriber. Depending on the contribution, the amount of pension will vary between Rs 1,000 and Rs 5,000 a month. The same pension would be paid to the spouse of the subscriber and on the demise of both the subscriber and spouse, the accumulated pension wealth is returned to the nominee.
Under the APY, the subscribers would receive the fixed pension of Rs. 1000 per month, Rs. 2000 per month, Rs. 3000 per month, Rs. 4000 per month, Rs. 5000 per month, at the age of 60 years, depending on their contributions, which itself would vary on the age of joining the APY. The contribution levels would vary and would be low if the subscriber joins early and increase if he joins late.
For example, to get a fixed monthly pension between Rs. 1,000 per month and Rs. 5,000 per month, the subscriber has to contribute on a monthly basis between Rs. 76 and Rs. 376, if he joins at the age of 25 years. For the same fixed pension levels, the contribution would range between Rs. 181 and Rs. 902, if the subscriber joins at the age of 35 years.
It remains to be seen if Budget 2019 proposals relax the pension limit as well as the age for the benefit of a larger section of the population. Lack of adequate pension schemes with assured returns will make APY in its new version more popular than before. As an investor, it is still important to save for long term pension needs through equity mutual funds and do not entirely rely on assured return schemes.