- Date : 15/10/2020
- Read: 4 mins
Read about these various pension schemes so that you can make an informed decision.
It’s commonly acknowledged that thrift is a virtue that comes naturally to Indians. In keeping with this, there are several government pension schemes available here. Let’s look at some of the most well-regarded and popular options:
Atal Pension Yojana
Pradhan Mantri Atal Pension Yojana is a government scheme targeted at the unorganised labour sector. Atal Pension Yojana eligibility requires subscribers to be aged between 18 and 40, and the benefits would be available to them after the age of 60.
The scheme involves a monthly contribution between Rs 1,000 and Rs 5,000. The amount depends on the age at which a person joins as well as the monthly pension amount which they apire for. This is clear from the Atal Pension Yojana chart.
Source: economictimes.indiatimes.com
Atal Pension Yojana benefits are many. It allows the unorganised sector to save in small amounts and build up to an amount that lets them meet their essential needs in later life. This is a great support to people who may not have very high earnings but are still trying to set up a fund for their future.
Subscription to Atal Pension Yojana is very easy. An Atal Pension Yojana form is available online and requires only basic information. A quick glance at the Atal Pension Yojana calculator will tell you what amount you will have to contribute at your joining age.
Related: Retirement planning for pros: National Pension Scheme
There are several other schemes that are pure pension plans, such as:
- National Pension Scheme – NPS is a voluntary defined contribution retirement savings scheme where the person’s savings are invested in diversified portfolios by the Pension Fund Regulatory and Development Authority (PFRDA). It also offers a tax benefit under Section 80.
- Swavalamban Pension Yojana – A pension system for the unorganised sector.
- Post Office Monthly Income Scheme – Post offices offer a great network as they are spread throughout the country. The post office savings scheme allows a maximum investment of Rs 4.5 lakh for an individual account and Rs 9 lakh in a joint account. The interest is paid every month at the rate of 7.3% per annum. The maturity period is 5 years and the account is transferable between locations.
- Pradhan Mantri Vaya Vandana Yojana – This offers a guaranteed interest rate of 8% for a maximum investment of Rs 15 lakh. The pension can be taken monthly, quarterly, half-yearly, or yearly as decided by the individual at the time of purchasing the policy.
Related: Five must-have investment instruments for retirement planning
Public Provident Fund
The PPF scheme by the government, while not exactly a pension scheme, can do the job – and very well at that. The PPF scheme allows a PPF account to be extended in blocks of 5 years after the first lock-in period of 15 years is over. One may subscribe to PPF at any age.
In the extended blocks of 5 years, the subscriber may make one partial withdrawal. Thereby, if the subscriber decides to withdraw their yearly interest amount while leaving the corpus intact, they can get a yearly pension without impacting the PF corpus. This is a safe, tax-free, high interest-earning scheme.
The PPF account interest rate is a competitive 7.4% (effective from July 2020). Of the various government schemes, PPF is an excellent vehicle for savings and generating tax-free income along with the benefit of receiving tax rebate on contributions if you are an income taxpayer.
You could also explore an SWP (Systematic Withdrawal Plan) with your mutual fund. These are not typical pension plans but they can be a formidable income stream. SWPs withdraw and sell a fixed pre-decided number of mutual fund units and credit the income to your account every month. Do you know what is the right age to start planning your retirement? Read this to find out.
It’s commonly acknowledged that thrift is a virtue that comes naturally to Indians. In keeping with this, there are several government pension schemes available here. Let’s look at some of the most well-regarded and popular options:
Atal Pension Yojana
Pradhan Mantri Atal Pension Yojana is a government scheme targeted at the unorganised labour sector. Atal Pension Yojana eligibility requires subscribers to be aged between 18 and 40, and the benefits would be available to them after the age of 60.
The scheme involves a monthly contribution between Rs 1,000 and Rs 5,000. The amount depends on the age at which a person joins as well as the monthly pension amount which they apire for. This is clear from the Atal Pension Yojana chart.
Source: economictimes.indiatimes.com
Atal Pension Yojana benefits are many. It allows the unorganised sector to save in small amounts and build up to an amount that lets them meet their essential needs in later life. This is a great support to people who may not have very high earnings but are still trying to set up a fund for their future.
Subscription to Atal Pension Yojana is very easy. An Atal Pension Yojana form is available online and requires only basic information. A quick glance at the Atal Pension Yojana calculator will tell you what amount you will have to contribute at your joining age.
Related: Retirement planning for pros: National Pension Scheme
There are several other schemes that are pure pension plans, such as:
- National Pension Scheme – NPS is a voluntary defined contribution retirement savings scheme where the person’s savings are invested in diversified portfolios by the Pension Fund Regulatory and Development Authority (PFRDA). It also offers a tax benefit under Section 80.
- Swavalamban Pension Yojana – A pension system for the unorganised sector.
- Post Office Monthly Income Scheme – Post offices offer a great network as they are spread throughout the country. The post office savings scheme allows a maximum investment of Rs 4.5 lakh for an individual account and Rs 9 lakh in a joint account. The interest is paid every month at the rate of 7.3% per annum. The maturity period is 5 years and the account is transferable between locations.
- Pradhan Mantri Vaya Vandana Yojana – This offers a guaranteed interest rate of 8% for a maximum investment of Rs 15 lakh. The pension can be taken monthly, quarterly, half-yearly, or yearly as decided by the individual at the time of purchasing the policy.
Related: Five must-have investment instruments for retirement planning
Public Provident Fund
The PPF scheme by the government, while not exactly a pension scheme, can do the job – and very well at that. The PPF scheme allows a PPF account to be extended in blocks of 5 years after the first lock-in period of 15 years is over. One may subscribe to PPF at any age.
In the extended blocks of 5 years, the subscriber may make one partial withdrawal. Thereby, if the subscriber decides to withdraw their yearly interest amount while leaving the corpus intact, they can get a yearly pension without impacting the PF corpus. This is a safe, tax-free, high interest-earning scheme.
The PPF account interest rate is a competitive 7.4% (effective from July 2020). Of the various government schemes, PPF is an excellent vehicle for savings and generating tax-free income along with the benefit of receiving tax rebate on contributions if you are an income taxpayer.
You could also explore an SWP (Systematic Withdrawal Plan) with your mutual fund. These are not typical pension plans but they can be a formidable income stream. SWPs withdraw and sell a fixed pre-decided number of mutual fund units and credit the income to your account every month. Do you know what is the right age to start planning your retirement? Read this to find out.
