The proposed pension scheme for the unorganised sector workers — Pradhan Mantri Shram Yogi Maandhan (PMSYM) — with the government as a co-contributor, has put a big question mark on the continuity and growth of the existing flagship pension scheme, Atal Pension Yojana (APY), which is also targeted at the same segment of the population. It has also raised questions about duplication of the government’s pension initiatives.
The new scheme, promising Rs 3,000 per month pension, will benefit around 42 crore workers in the sector, Finance Minister Piyush Goyal said while presenting the interim Budget on February 1. In APY, previously known as Swavalamban Yojana and announced in the 2015 Budget speech by Finance Minister Arun Jaitley, the full contribution is by the subscriber. APY, administered by the Pension Fund Regulatory and Development Authority (PFRDA) under the National Pension Scheme (NPS), offers monthly pension up to Rs 5,000 under different slabs.
Hemant Contractor, Chairman, PFRDA, said it is too early to comment on the government’s new scheme as details are not known. “Prima facie, the new scheme will compete with APY. The attraction for the new scheme is that the government will be a co-contributor.” APY has a subscriber base of 1.46 crore. “The new pension scheme has the government as a 50 per cent co-contributor which is not there in the APY. So, people will be attracted to the new pension scheme. I don’t think it will cannibalise the APY scheme,” Contractor said, when asked whether it will eat into the APY base. The new pension scheme is administered by the Labour Ministry. Contractor said PFRDA has requested the government to increase the age limit under APY to 50 years from 40 years. “We have asked the government for more slabs whereby monthly pension under the top slab will be Rs 10,000 per month. APY makes a difference in that it has got five features,” he said.
Growth likely for both, provided APY gets incentives
Insurance sector officials are perplexed by the duplication of efforts on the pension front. “The government could have made APY more attractive instead of launching one more similar scheme,” said an official of a private pension fund.
As of now, total corpus of NPS was at Rs 2.95 lakh crore which may cross Rs 3.10 lakh crore by the fiscal-end. In APY, subscribing workers below the age of 40 are eligible for pension of up to Rs 5,000 per month on attainment of 60 years of age. The minimum age of joining APY is 18 years and maximum age is 40 years. This scheme is linked to the bank accounts opened under the Pradhan Mantri Jan Dhan Yojana scheme and the contribution is deducted automatically.
While announcing the Pradhan Mantri Shram Yogi Maandhan, Goyal said, “An unorganised sector worker joining new pension yojana at the age of 29 years will have to contribute only Rs 100 per month (or Rs 1,200 per year) till the age of 60 years.” Similarly, a worker joining the pension yojana at 18 years, will have to contribute as little as Rs 55 per month (or Rs 660 total yearly investment) only. The government will deposit equal matching share in the pension account of the worker every month.
“It is expected that at least 10 crore labourers and workers in the unorganised sector will avail the benefit of ‘Pradhan Mantri Shram- Yogi Maandhan’ within next five years making it one of the largest pension schemes of the world,” Goyal had said. The government has allocated a sum of Rs 500 crore for the scheme and indicated that additional funds will be provided as needed. The scheme will also be implemented from the current year.
Meanwhile, a Labour Ministry notification said all unorganised sector workers up to 40 years of age can subscribe to the PMSYM scheme, which entails a minimum monthly pension of Rs 3,000, from February 15.
The monthly contribution by the worker joining the scheme would be Rs 55, with matching contributions from the government. The contributions would rise at higher age. The worker joining the scheme at the age of 40 years would contribute Rs 200, while workers at the age of 29 years would pay Rs 100.
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