What is Atal Pension Yojana Scheme?
Atal Pension Yojana Scheme, also known as APY, is a pension scheme launched by government of India.
Depending on the contribution made by a person of age starting from 18 and 40, at the age of 60, a sum of 1,000, 2,000, 3,000, 4,000, or 5,000 will be paid monthly.
What is Pension?
A pension is a fixed amount paid monthly to a person after his retirement. When the person is working he has to make regular monthly contribution / premiums for his retirement and from this pool the pension is paid out later.
What are the features of Atal Pension Yojana Scheme?
- Monthly contribution by the person during his work career till age of 60.
- Monthly pension of certain amount from age 60 onwards.
- After death of person, his wife/ husband will continue to get that amount.
- After death of spouse, nominee will get a lump-sum as determined by the government.
- Mr Ram is 30 years old. His wife Sita Devi is 25 years old. They have a son Master Ramaputra.
- Mr Ram opts for Atal Pension Yojana, with his wife as benefactor and son as nominee.
- He contributes Rs 577 per month or Rs 6,924 annually.
- He retires at the age of 60.
- From his 61st year, he shall receive Rs 5,000 pension per month.
- At the age of 75, Mr Ram passes away, after receiving 15 years of pension.
- Now his wife Sita Devi will start getting Rs 5,000 per month.
- Assuming she dies 5 year later, their son, being a nominee could get upto Rs 850,000 as lump-sum.
Please see the contribution chart below for details of premiums to be paid at different entry age and corresponding expected monthly pension.
Benefits of the Atal Pension Yojana Scheme
- Simple Scheme
- Easy to understand
- Government backing
- Very good for poor people who have no pension
If you are focused on returns, this may not be the best scheme. I ran 4 scenarios and came up with a return of at most 7.8%, which is the same as a fixed deposit.
However for people who are not investment experts, this is a good pension scheme.
I hope you found this article useful. If you have any comments please feel free to contact me. Before making any investment decision, please contact your financial adviser.
I have provided this article for educational purpose only.
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