New subscriptions under the Atal Pension Yojana (APY) have been on the rise even during the pandemic period thanks to a stepping up of the outreach programmes by the government and the Pension Fund Regulatory and Development Authority (PFRDA), but income deficiency seems to be forcing an increasing number of workers to leave the scheme prematurely. While a record 79 lakh workers, mostly from the unorganised-sector, joined the APY in FY21, even as the pandemic wreaked havoc, 10 lakh moved out of the scheme in the year, reflecting the income constraints faced by these low-wage earners.
In just the first five months of the current fiscal year, 5.9 lakh people opted out of the scheme, while around 30 lakh joined. Those who opted out of the scheme were 19.7% of the newly joined in April-August, FY22 as against 12.7% in FY21, 10.1% in FY20 and 6.4% in FY19.
APY is the government-backed, voluntary scheme meant to provide old-age income security in the form of minimum assured pension (ranging from Rs 1,000-5,000/month), in proportion to individual contributions, even as it is market-linked. It forms the bulk of the subscriber base under the fold of the New Pension System (NPS).
In a recent interview to FE, PFRDA chairman Supratim Bandyopadhyay expressed confidence that the a record 1 crore would be added to NPS subscriber base in FY22, 90% of which under APY, thanks to the authority’s distribution partners — mainly banks and banking correspondents. The gross NPS subscriber base stood at 4.52 crore at the end of August, 2021.
The PFRDA is expecting fresh NPS fund inflows of Rs 1.25 lakh crore in FY22, a growth of 22% on year. Depending on market conditions, asset under management could see over 30% growth to somewhere near Rs 7.5 lakh crore in FY22, it reckons.
Gautam Bhardwaj, co-founder at pinBox Inclusion, a global pension technology firm, said that although the increase in the coverage under APY has been creditable, by not paying adequate attention to effective retirement literacy, a ‘false expectation’ about old-age income security among lower income individuals is being created. According to him, apart from income constraints, realisation of the inadequacy of the scheme’s benefit might also be a reason why people were opting out.
Quoting NSDL data, Bhardwaj said 72% of the those subscribed the scheme, as on March 31, 2020, opted for the minimum Rs 1,000 per month pension scheme. Only 17% of the subscribers had opted for Rs 5,000 monthly pension. Under the APY, a subscriber, aged between 18-40 years, can choose a minimum monthly pension ranging between Rs 1,000 and Rs 5,000. APY is not inflation-indexed, he noted.
Meanwhile, the government is considering combining APY with two popular insurance schemes – Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Suraksha Bima Yojana (PMSBY– in a move aimed at making the scheme more attractive and to ensure better coverage. Of course, a subscriber will have to contribute extra amounts to avail herself of the accidental and life coverages.