Pension
Pension – How does it work?
Pension is a type of retirement income that an individual has budgeted for during his or her life. When a person begins planning for retirement early in life, it is simpler to accumulate a significant amount of money.
Depending on the type of pension you have, you, your employer, and other parties like your spouse or children may all contribute to it. Once you reach the age of 55 or retire, you will then have a variety of options for how you want to receive your pension income.
In India, pension systems cover around 12% of the labor force, or roughly 58
million. The Employees Provident Fund Organization (EPFO) is required to provide coverage for those who work for the government, government entities, public and private sector businesses, and who are members of the organized sectors.
The EPFO covers organizations with 20 or more employees. The remaining 88% of the workforce is primarily employed in the unorganized sector (self-employed, labor earning daily wages, farmers, etc.), however some are employed in the organised sector but are not required to be covered by the EPFO.
The Public Provident Fund (PPF) and Postal Savings Schemes have historically been the main long-term savings mechanisms for this percentage of the workforce, but they have only catered to a relatively tiny portion of this population.
The Indian government has taken several actions since 2001–2002 to highlight the need for pension changes for the Central Government as well as the unorganized sector for a variety of reasons.
Atal pension yojana
Atal pension yojana – Its benefits
According to the financial experts in FIA Global, the Atal Pension Yojana (APY), which was introduced on May 9, 2015, aims to establish a universal social security system for all Indians, with a focus on the poor, the underprivileged, and unorganised sector employees. PFRDA, or the Pension Fund Regulatory and Development Authority, oversees overseeing the Atal Pension Yojana.
The Atal Pension Yojana is a social security programme that the Indian government launched with the intention of giving every one of its residents a reliable income once they turn 60.
It is built on the framework of the National Pension Scheme (NPS). The branch designated under APY scheme will immediately give the subscriber a Permanent Retirement Account Number (PRAN). Under APY, users can choose to receive a fixed monthly pension of up to Rs. 1000, Rs. 2000, Rs. 3000, Rs. 4000, or Rs. 5000 in exchange for a monthly amount or subscription.
For a period of five years, the Central Government will co-contribute 50% of the total annual contribution, or Rs. 1000 per year, whichever is less, to the accounts of subscribers who join this scheme up to December 31, 2015 and those subscribers who are not income tax filers, and are not members of any statutory social schemes.
Contributions to APY can be made on a monthly, quarterly, or half-yearly basis by the subscribers. In case a subscriber passes away too soon (before turning 60), his/her spouse may continue making contributions to the APY account for the remainder of the vesting term, up until the original subscriber attains the age of 60.
