For people looking to invest for a fixed pension during their retirement, the guaranteed pension scheme of the government — Atal Pension Yojana (APY) — is an attractive option. The APY pension scheme
is administered by the Pension Fund Regulatory and Development Authority (PFRDA) and is available to people aged 18 to 40 years.
It is a deferred pension scheme which means that one needs to keep contributing regularly till age 60 and, thereafter, a fixed amount of monthly pension will begin. This social security scheme was launched to provide them with a defined pension between Rs 1,000 to Rs 5,000, depending on the contribution and its period.
One thing that may stop people from subscribing to this Central Government’s flagship pension scheme is the notion that Rs 5000 is the maximum amount one can get as a monthly pension. However, this is not true. The maximum pension one can get under APY could be more than Rs 5000, but there is a condition. In order to get a pension of over Rs 5,000, the subscribers’ contribution should return more than the assumed return during the subscription period.
When someone joins the scheme, a minimum pension of Rs 1,000 or 2,000 or 3,000 or 4,000 or 5,000 is guaranteed on the basis of an assumed return. The contributions to APY are invested as per the PFRDA guidelines. If the actual return is more than the assumed return, then the subscriber would be eligible for the excess amount. In case the actual return is lower than the assumed return, the government will pay the balance amount to provide the guaranteed minimum pension.
The biggest benefit of joining APY is that the scheme guarantees pension amount. According to PFRDA, the benefit of minimum pension is guaranteed by the Government in the sense that “if the actual realised returns on the pension contributions are less than the assumed returns for minimum guaranteed pension, over the period of contribution, such shortfall shall be funded by the Government.”
Subscribers can get more than the guaranteed minimum pension if the actual return on their contribution is better than the assumed return. “If the actual returns on the pension contributions are higher than the assumed returns for minimum guaranteed pension, over the period of contribution, such excess shall be credited to the subscriber’s account, resulting in enhanced scheme benefits to the subscribers,” says the regulator.
It is worth mentioning that subscribers’ contribution to APY are invested as per the guidelines prescribed by the PFRDA. After the completion of 60 years, subscribers can submit the request to the associated bank for drawing the guaranteed minimum monthly pension or higher monthly pension, if investment returns are higher than the guaranteed returns in APY.