What is Atal Pension Yojana or APY? – A Detailed Analysis

Atal Pension Yojana is a pension plan initiated by the Government of India on 1st June 2015 to aware people to plan their retirement well in advance. The primary target group is the unorganized sector workers. However, anyone can subscribe to the scheme. The unorganized sector workers constitute around 88% of the total labor force in India. There is no formal social security system in India to provide a pension to the needy after their retirement age. In a few developed countries like the USA, people pay taxes during their productive lives and get social security in pension or medical assistance whenever they need it. It may not be feasible in India due to its limited resources, overpopulation, and corruption.

Thus, it is the responsibility of Indians to plan for their retirement well in advance. Atal Pension Yojana helps to achieve it. The most attractive feature of the plan is its guaranteed pension and safety. Further, the Pension Fund Regulatory and Development Authority (PFRDA) regulates APY. Also, the National Pension System (NPS) infrastructure provides service to the APY subscribers. We will discuss the NPS infrastructure in detail in our forthcoming posts. Now, let’s understand the APY scheme in detail.

How Does Atal Pension Yojana Account Work?

Atal Pension Yojana is an attractive pension plan. It works in the following way.

  • You open an APY account.
  • Choose a monthly pension amount you want to receive after retirement.
  • Your monthly contribution amount will depend on the pension amount you have chosen and your age.
  • You pay the contribution amount until you reach 60 years of age.
  • After that, you receive a guaranteed pension until the end of life.
  • After the subscriber’s death, their spouse gets a pension.
  • Finally, after the death of the spouse, the nominee receives a lump sum amount

Who Can Open An Account?

To open an Atal Pension Yojana account, you need to be a resident of India, and your age must be between 18 to 40 years. Thus, a Non-Resident India (NRI) cannot open the account. Besides, you need a bank account. It is essential as the premium will be auto-debited from your savings account. You can open a savings account if you don’t possess one. Most importantly, you should produce your Aaddhar card and mobile number at the time of the account opening to avoid any pension disbursal issue or claim. It will also help you to get periodic updates on your APY accounts.

It will help if you remember that you can open only one account. Moreover, the existing subscribers of NPS, EPF, or PPF can also open an APY account. There is no restriction on it.

How Much Pension Will You Get?

Once you reach the age of 60 years, your contribution stops, and pension starts. However, you have to choose the pension amount you want to receive at the time of account opening. Also, you can change the amount during the course. But, it is allowed once per year. Further, it is essential to note that your contribution amount will change accordingly.

There are only five pension payout options to date. The options are Rs. 1,000, Rs. 2,000, Rs. 3,000, Rs. 4,000, and Rs. 5,000. There is no option to increase the pension amount more than that. However, the pension amount is guaranteed. As we have discussed, it is more suitable for those lower-income groups of people who cannot afford a higher contribution amount. However, it looks attractive due to its low contribution amount. Thus, you can opt for the plan even if you have subscribed yourself to other pension plans.

Note: Your pension amount may be higher than the amount you have chosen if you get a better return on your contribution. Moreover, your pension amount will not be less than the guaranteed amount, even if you don’t get better returns on your contribution amount. In this case, the Government of India will bear the loss. Therefore, in either case, you will get a guaranteed pension amount.

How Much Do You Need To Contribute Each Month?

You can contribute the amount monthly, quarterly, or half-yearly basis. Further, you can also change the frequency of contribution once a year. For example, if your contribution frequency is monthly, you can change it to quarterly or half-yearly.

However, the contribution will depend on the pension amount you want to receive after retirement. Here is a table that will help you to understand it better.

Source: https://www.npscra.nsdl.co.in/

Thus, your contribution amount will depend on the guaranteed monthly pension you choose and your age at the time of entry. It will also vary if you want a quarterly or half-yearly contribution option instead of monthly. Once you fix your monthly contribution amount, the amount will be auto-debited from your savings account and deposited into your APY account.

As per the chart, you need to contribute Rs 210 only for a pension amount of Rs 5,000 for the whole life. However, the monthly contribution amount increases with age. For example, a 40-year-old person has to deposit Rs 1,318 for the same pension (Rs 5,000). If you look at both cases, where an 18-year-old boy contributes Rs 1,05,840 (Rs 210*12*42 years), a 40-year-old person deposits Rs 3,48,960 (Rs 1,454*12*20 years) for the same amount of pension (Rs 5,000). That is 230% more than the total contribution of an 18-year-old one.

What Your Spouse And Nominee Will Get?

Once the subscriber reaches the age of 60, the pension starts. It can be Rs. 1,000, Rs. 2,000, Rs. 3,000, Rs. 4,000, or Rs. 5,000 that the subscriber opts at the time of joining or even changes during the term. Further, upon the subscriber’s death, their spouse will get the same pension throughout life. Finally, on the subscriber’s spouse’s death, the nominee will get a lump sum amount according to the pension payout.

  • 1.7 Lakh rupees for Rs 1,000 pension plan
  • 3.4 Lakh rupees for Rs 2,000 pension plan
  • 5.1 Lakh rupees for Rs 3,000 pension plan
  • 6.8 Lakh rupees for Rs 4,000 pension plan
  • 8.5 Lakh rupees for Rs 5,000 pension plan

An Example

Suppose Amar, who is 18 years old, decides to receive Rs. 5,000 pension when he retires and chooses to contribute monthly and pays Rs 210 per month. Thus, he contributes for the next 42 years. He contributes Rs 1,05,840 in total. Further, he gets a pension of Rs 5,000 per month once he attains 60 years of age. He lives for another 20 years and dies at the age of 80 years. Then his spouse gets the same pension until she lives (suppose she lives ten more years). Then, after her death, the nominee (in this case, his son) will get a lump sum of Rs 8.5 Lakh.

If you calculate all these benefits, it will be a tune of Rs. 26,50,000 with just an investment of Rs 1.05 Lakh. It’s unbelievable. Take a look.

Atal Pension Yojana example
Atal Pension Yojana example
  • The subscriber gets Rs. 5,000 per month for 20 years [Rs. 5000*12*20 years = Rs. 12 Lakh].
  • The spouse gets Rs. 5,000 per month for the next 10 years [Rs. 5000*12*10 years =Rs. 6 Lakh]
  • Finally, the nominee gets Rs 8.5 Lakh in a lump sum
  • Total Benefits = [Rs. 12 Lakh + Rs 6 lakh + Rs. 8.5 Lakh = Rs 26.5 Lakh]

You should note that this is just an example and nothing more.

What If You Miss The Installments?

It is always advisable that you maintain sufficient balance in your savings accounts on the due date. However, you have to pay the penalty if you miss the installment, and it depends on the amount of your monthly contribution.

Monthly ContributionPenalty Amount per Month
Upto Rs. 100One rupees
Between Rs. 101 to Rs. 500Two rupees
Rs. 501 to Rs. 1,000Five rupees
Rs. 1,001 or moreTen rupees

Note: The penalty amount you pay will be added to your corpus. The Government will not take it. Further, if your payment frequency is quarterly or half-yearly, you will be charged accordingly. The bank will recover the missed installments and the penalty whenever funds are available in your bank account.

Another vital thing to note is that your accumulated amount in APY account reduces once you default your contribution. It is due to their maintenance charges. Therefore, you have to activate it by paying the penalty before it becomes zero. However, there is no option after that.

Where Does The Government Invest Your Money?

The Government does not invest all your money in one asset class. It diversifies your contributions to ensure the safety of your capital and achieve a decent return. Thus, your money is invested in the following way.

  • Government securities – 45-50%
  • Debt securities and term deposits of banks – 35%
  • Equity and related instruments – 5-15%
  • Money market – 0-5%
  • Asset-backed securities – 0-5%

However, you won’t need to be worried as the Government gives you the guarantee of the pension amount you have chosen. As discussed earlier in the post, if your contribution earns a good return, the Government will share it with you, unless it will bear the loss.

Note: The Government has not declared any fixed rate of interest for APY.

Can You Close The Atal Pension Yojana Account Prematurely?

Yes, a subscriber can close the account prematurely. However, there are two conditions. The conditions are as follows.

  • If a subscriber dies or suffers from a life-threatening disease
  • If a subscriber wants to leave the plan voluntarily

In either case, the contribution amount, along with the return earned, is paid out. However, the maintenance charges deducted are not refunded.

What Does Happen If A Subscriber Dies Before He Or She Retires?

If a subscriber dies before he or she attains 60 years, then the spouse has two options. The options are as follows.

  • She can close the account
  • She can continue the account

If the subscriber’s spouse wishes to close the account, she should intimate the same to the bank. And after successful closure of the account, the spouse will receive the accumulated amount plus the returns earned.

On the other hand, if the spouse chooses to keep the account active, they can continue the contribution for the remaining period and get the guaranteed pension until the end of their life. For example, if the subscriber dies at the age of 55, then his or her spouse can continue contributing for the next five years to get a pension for life.

Nomination Facility

A nomination is compulsory in the APY account as it is a retirement account. If married, your spouse is the default nominee. Otherwise, you can choose your nominee. It is wise to produce the nominee’s Aadhaar so that there will be no pension disbursal issue.

Account Transfer

You need not transfer the account if you move one place to another. However, if you still want to transfer the account, try to transfer it within the same bank. I mean, Intrabank transfer. That is the most comfortable mode. In other words, Interbank transfer is the hardest way to choose. 

You will receive a PRAN (Permanent Retirement Account Number) after you become a subscriber. That is a unique number, and that’s your identity.

How To Get Updates On My Atal Pension Yojana Account?

You will get messages on your mobile and receive email notifications whenever a transaction occurs, or you request a service. Further, to check the status of your APY account, you can visit the website of NSDL, or download the APY Android App from Google Playstore and login to see the details of your APY account.

Charges Associated With APY Account

There is an organization that keeps your record, maintain it, and makes necessary updates. It is called the Central Recordkeeping Agencies (CRA). Further, there are professional fund managers who manage your contribution amount to maximize returns for you. They are called Pension Fund managers. Similarly, a custodian provides service to hold the securities in physical form or DEMAT form besides other assigned services. For example, Stock Holding Corporation of India Ltd. (SCHIL) has been appointed by PFRDA to function as “The Custodian and Depository Participant” to APY. Thus, you need to pay for all these services. However, the fee is meager. 

  • CRA charges Rs 15 per account as account opening charges.
  • CRA charges Rs 40 per account per annum as account maintenance charges
  • Pension Fund Managers charge 0.0102% per annum of AUM (Asset Under Management) as an investment management fee. AUM means the total amount of money they manage.
  • Custodian charges 0.0075% for electronic and 0.05% per annum for the physical segment of AUM as Investment Maintenance Fee.

Note: These charges are not charged to you directly. They are either adjusted in Net Asset Value (NAV) or cancelation of units.

Pros And Cons Of Atal Pension Yojana


  • A guaranteed pension plan
  • Safe and secure as the Government of India backs it
  • Auto-debit system
  • Professional fund management
  • Low maintenance costs
  • Benefits beyond life
  • Voluntary exit option


  • Age restriction (People above 40 cannot apply)
  • Only five pension payout options
  • The maximum pension amount is Rs 5,000 per month only
  • Penalty for default
  • The maximum investment is in debt securities

A Final Thought On Atal Pension Yojana

The maximum pension one can get under the Atal Pension Yojana is Rs. 5,000 per month. If we take an average rate of 6% inflation into account, the value of Rs. Five thousand will be equal to just Rs 1,250 in the next 24 years. Therefore, if you subscribe to the plan and think that you have planned for your retirement life, it can be dangerous to your financial health.

You earn for 30-40 years, and suddenly your income stops at the time of retirement. Further, your expenses skyrocket. For example, medicines, medical bills, doctor visits, frequent health check-ups are the most expensive bills you might have to pay. Thus, you can take the plan with a pinch of salt. Retirement planning is more comprehensive than any other financial goal planning and needs more attention.

The Government of India is planning to raise the maximum pension amount to Rs. 10,000. However, the Government has made no such formal announcements. 

Note: Both you and your spouse can apply for the scheme. That way, you can get a monthly pension of Rs. 10,000 and pass Rs. 17 Lakh to the next generation.

I hope I have covered every detail of the APY scheme. However, you can write to me if you need any further information. Don’t forget to share the article with your dear ones and subscribe to my newsletter to get notifications whenever I publish a new post.

Thanks and regards,



4 thoughts on “What is Atal Pension Yojana or APY? – A Detailed Analysis”

  1. Thank you Sir for the deep information regarding APY. I have already subscribed it for a pension amount of ₹5000 per month and contributing ₹318 monthly. I think l have done a part of my retirement planning.

    It will definitely be helpful a lot for low income groups.

  2. Good informations came to know about APY.Sometimes we turn a deaf ear towards such YOYONAs of govt.as if these are not meant for us but for only very poor people.Such assumptions are wrong.Readers will know a lot about APY and can guide to people.
    Thank you very much sir.



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