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Personal Finance: Social security boost: Range of new pension, insurance schemes on anvil

The finance minister has already held one round of meeting with public sector banks on the launch of insurance schemes.

Written by Surabhi | Updated: April 6, 2015 12:01:00 am
arun jaitley, jan dhan yojana scheme, insurance scheme, government insurance scheme, Pradhan Mantri Suraksha Bima Yojana, Atal Pension Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana, indian express money The Pradhan Mantri Suraksha Bima Yojana, Atal Pension Yojana and Pradhan Mantri Jeevan Jyoti Bima Yojana that were announced by finance minister Arun Jaitley in the Union Budget 2015-16.

 

A plethora of new schemes for pension and insurance are set to be launched this year by the government with an aim to provide universal social security. Contrary to popular perception, many of these will be available to all citizens and not just to those living close to the poverty line.

The three key schemes include Pradhan Mantri Suraksha Bima Yojana, Atal Pension Yojana and Pradhan Mantri Jeevan Jyoti Bima Yojana that were announced by finance minister Arun Jaitley in the Union Budget 2015-16.

Pointing out that a large proportion of the country’s population is without insurance of any kind, the minister had announced, “Worryingly, as our young population ages, it is also going to be pension-less. Encouraged by the success of the Pradhan Mantri Jan-Dhan Yojana, I propose to work towards creating a universal social security system for all Indians, specially the poor and the under-privileged.”

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The finance minister has already held one round of meeting with public sector banks on the launch of these schemes. The plan is to implement these on the same scale as account opening under the Pradhan Mantri Jan-Dhan Yojana. To ensure ease for customers, subscription and claim forms will be kept simple and the finance ministry is also thinking in terms of empowering banks to enable faster claim resolution under these schemes.

Significantly, in the interim, the Employees’ Provident Fund Organisation has also proposed a new social security fund — the Unorganised Sector Workers’ Social Security Fund that can be joined by any private sector worker.

The Indian Express takes a closer look at each of these schemes:

Atal Pension Yojana: A co-contributory fixed pension scheme, the Atal Pension Yojana will be focused at unorganised sector workers who are not members of any social security scheme. The scheme is expected to be launched from June 1, 2015.

Under the APY, subscribers would receive a fixed monthly pension of Rs 1,000; Rs 2,000; Rs 3,000; Rs 4,000 or Rs 5000, depending on his or her contribution, starting from the age of 60 years.

The minimum age for joining the scheme is 18 years and the maximum is 40 years with a minimum contribution period of 20 years. Contributions would vary from as little as Rs 48 a month for a Rs 1,000 pension to Rs 248 a month for a pension of Rs 5,000 per month, according to a finance ministry official.

The Central government would provided a fixed return by co-contributing either 50 per cent of the subscriber’s contribution or Rs 1,000 per year —whichever is lower; for a period of five years from 2015-16 to 2019-20 for subscribers who join the National Pension System before the end of this year.

However, do keep in mind that the Central government contribution would be available only for those subscribers who are not income tax payers. The existing subscribers of the NPS Swavalamban scheme would be migrated to the APY, unless they opt out of it, according to note prepared by the department of financial services in the finance ministry.

The scheme would be administered by the Pension Fund Regulatory and Development Authority and investments would be done on the pattern as that for NPS for central government officers.

Pradhan Mantri Suraksha Bima Yojana: A personal accident cover, it will be available to all citizens in the age group of 18 to 70 years and have an Aadhar-linked bank account.

The scheme provides a cover of Rs 2 lakh in case of accidental death or full disability and a cover of Rs 1 lakh in case of partial disability.

The premium is a more than reasonable Rs 12 per year along with service tax. Of this, while Rs 10 would be for the insurance company, Rs 1 each would be given to the bank and the banking correspondent or the micro-insurance agent.

The cover would be for a period from June 1 to May 31, renewable every year. In the first year of its launch, the subscription period is likely to be extendable till August 31. After that, the cover would commence from the 1st of the month after the premium is paid.

To opt in for the scheme, subscribers would have to fill a subscription form with their bank and an auto debit option.

According to the DFS note, banks are expected to tie up with any general insurer which wants to offer the cover.

Pradhan Mantri Jeevan Jyoti Bima Yojana: As the name suggests, the scheme provides life insurance cover of up to Rs 2 lakh for death by any reason.

Renewable every year, it will start from June 1 for a one year period till May 31. This scheme too will be open to all subscribers between the age of 18 years to 50 years who have an Aadhar linked bank account. However, the coverage under the scheme can go up to 55 years if premium is paid over after attaining the age of 50 years.

According to an internal note of the DFS, subscribers would have to pay an annual premium of Rs 330 along with service tax. Of this, Rs 289 would be paid to the insurance company, Rs 11 to the bank and Rs 30 to the banking correspondent or the micro-insurance agent.

As in the case of the Pradhan Mantri Suraksha Bima Yojana, subscribers who want a life insurance cover would have to fill a subscription form with their bank and allow auto debit option. For the first year of the launch, the subscription period would be extendable till August 31 and the cover would commence from 1st of the month after which the premium is paid.

Unorganised Sector Workers’ Social Security Fund: The scheme, which has been proposed by the labour ministry as part of the amendments to the EPF and Miscellaneous Provisions Act, 1952 would provide benefits of provident fund, pension and insurance to voluntary subscribers. It would be run by the EPFO and aimed at informal sector workers.

However, unlike the EPF, subscribers to this new scheme would have the option to contribute funds as and when they have money — as in the case of a mutual fund.

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