Saturday, June 13, 2015

Atal Pension Yojana review

What is Atal Pension Yojana?
Atal Pension Yojana (APY), a pension scheme for citizens of India focused on the
unorganised sector workers. Under the APY, guaranteed minimum pension of Rs.
1,000/-, 2,000/-, 3,000/-, 4,000 and 5,000/- per month will be given at the age of 60
years depending on the contributions by the subscribers.

Who can subscribe to APY?
Any Citizen of India can join APY scheme. The following are the eligibility criteria,
i The age of the subscriber should be between 18 - 40 years.
ii He / She should have a savings bank account/ open a savings bank account.
iii The prospective applicant should be in possession of mobile number and its
details are to be furnished to the bank during registration.

A. 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.

B. In case of death of the Subscriber due to any cause:
In case of death of subscriber pension would be available to the spouse and on the death of both of them (subscriber and spouse), the pension corpus would be returned to his nominee.

My Review of the Scheme:
I looked at the indicative returns, For eg., if your age is 30 and if you are looking for a pension of 5000 after reaching 60, govt asks you to pay rs 577 every month from age 30 till your 60. On 60, you start getting pension of 5k. When you and your spouse expire, total indicative corpus of 8.5L is returned to your nominee by govt.
If you calculate the RD of the money 577 you deposit for an annual  interest of 8%, you get 8.5L after 30 years and an 8% annual interest on this 8.5L will get you approx returns of 60k which is what is divided for 12 months and  given to you by pension

So the overall returns on your money is 8%, which is decent compared to any annuity scheme available. But dont forget that PPF has annual interest rate 8.75%, thought that would vary every year, it still could be higher than 8%.

To also note, APY does not fall under 80C deductions yet to my knowledge.

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