Atal Pension Yojana Scheme Review

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?

  1. Monthly contribution by the person during his work career till age of 60.
  2. Monthly pension of certain amount from age 60 onwards.
  3. After death of person, his wife/ husband will continue to get that amount.
  4. After death of spouse, nominee will get a lump-sum as determined by the government.

Illustration

  • 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.

Contribution Chart

Please see the contribution chart below for details of premiums to be paid at different entry age and corresponding expected monthly pension.

Atal Pension Yojana Scheme (APY) Chart

Benefits of the Atal Pension Yojana Scheme

  • Simple Scheme
  • Easy to understand
  • Government backing
  • Very good for poor people who have no pension

Returns

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.

FINAL WORDS

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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Reference

Subhodeep Mukhopadhyay

I am a Management Consultant in the Education Sector. In my previous corporate career, I have worked in Banking, Private Equity and Software industry. I am an MBA in Finance/ Computer Engineer and enjoy doing equity research and financial analysis in my free time.

4 thoughts on “Atal Pension Yojana Scheme Review

  • April 22, 2016 at 11:09 am
    Permalink

    Illustration
    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.
    As per illustration Ram will get RS 5000 pension per month .But after 30yrs what will be the value of RS. Rs 5000. According to me the lump Sump amount should be given to Ram and RS 5000 pension throughout his life and after him the pension should given to his wife .
    This will be the right decision . The nominee don’t have any right to get lump sump .
    The money deposited in Apy belongs to Ram he will be the genuine person to get the return .

    Reply
  • April 22, 2016 at 11:11 am
    Permalink

    As per illustration Ram will get RS 5000 pension per month .But after 30yrs what will be the value of RS. Rs 5000. According to me the lump Sump amount should be given to Ram and RS 5000 pension throughout his life and after him the pension should given to his wife .
    This will be the right decision . The nominee don’t have any right to get lump sump .
    The money deposited in Apy belongs to Ram he will be the genuine person to get the return .

    Reply
  • June 3, 2016 at 10:32 am
    Permalink

    Whether APY adopting is a good decision or not..please inform…

    Reply

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