Atal Pension Yojana

Atal Pension Yojana : Relevant Points

Atal Pension Yojana (APY) is a scheme for all those people of the unorganized sector who wish to join the National Pension System and are not the member of any other social security scheme. It has been launched on 1st June 2015.

According to NSSO Survey of 2011-12, in India, 88% of the total labour force do not have any pension provision for their after retirement life. In 2015-16 budget, government has announced Atal Pension Yojana (APY) which will provide the defined pension, depending on contribution and investment period.

Under this scheme, a person can get a fixed pension of Rs 1000/2000/3000/4000/5000 per month after completing the age of 60. However, the pension amount depends on their own contribution which varies on the age of joining the scheme.

The people who are looking to join this scheme must be a citizen of India. The eligibility age for this scheme is 10 to 40 years of age and the person must have a valid bank account. The minimum period of contribution by any person would be 20 years or more.

The bank will deduct the amount on monthly basis of the account of APY subscriber. If subscriber fail to contribute the penalty would be levied as per structure.

·         Rs 1 per month for contribution upto Rs 100 per month.

·         Rs 2 per month for contribution upto Rs 101 to 500/- per month.

·         Rs 5 per month for contribution upto Rs 501 to 1000/- per month.

·         Rs 10 per month for contribution beyond Rs 1000 per month

If payment not received till 6 months then account will be frozen. After 12 months account would be deactivated. After 24 months account will be closed. Exit from the scheme before 60 is not allowed. It is only permitted in the event of death or terminal disease. After the age of 60 the subscriber have to request to their bank branch and the fixed amount would be credited each month to subscriber and his spouse. After the death of subscriber the nominee would get the corpus which is invested by subscriber.

The nominee will get Rs 1.7 lakh if monthly pension is Rs 1000, Rs 3.4 lakh if monthly pension is Rs 2000, Rs 5.1 lakh if monthly pension is Rs 3,000, Rs 6.8 lakh if monthly pension is Rs 4000 and Rs 8.5 lakh if monthly pension is Rs 5,000.

The govt. would also contribute 50% of the total contribution or Rs 1000 per annum, whichever is lower, to each subscriber account, for a 5 year. The eligibility for this benefit is the person should not member of any other statutory social security scheme and should not be tax payer. The person should also join the NPS between the period of 1’st June 2015 and 31st December 2015.

The toll free no. for Atal Pension Yojana (APY) are 1800-180-1111, 1800-110-001. There is also dedicated no. for each state. I am not mentioning all here. If anyone need particular state toll free no. please ask me.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Do you know Reverse Mortgage Loan or RML?

Do you know Reverse Mortgage Loan or RML?

In the short and simple understanding, reverse mortgage is a financial arrangement to provide regular income to senior citizen. In our country the pension scheme has transferred to defined contribution from defined benefit. Under defined contribution pension schemes, the monthly or quarterly pension will depend on your contribution during your working period and fund value at the time of retirement.

In reverse mortgage senior citizens will get cash at specified time interval income against their home and they also allowed to live in their houses until death or sale of the house property. They do not need pay back until specified time.

In normal home mortgage the borrower paid back borrowed money with interest in the form of EMI (Equated Monthly Instalments) to lender. In the reverse mortgage, the lender make payment to the borrower and the loan amount gets accumulated.

It was introduced in India at 2007. Some public sector banks like SBI, Central Bank of India has introduced such product from 1st April 2008 under the guideline issued by National Housing Bank (NHB). Some features are given below:

• Under RML the person above age 60 can avail payments in the predetermined period from a lender against their house as a mortgage and at the same time they can reside in their mortgaged home also.
• Senior citizen need not to pay back during their life time. As per current guideline the maximum period of the payments is 20 year and the payment will not exceed Rs 50,000 per month.
• Once the payment period is over, the payout will be stopped but the borrower and the spouse would be allowed to live in their mortgaged house. Upon their death, the first offer of sale of the house will be made to legal heirs. In case they are unable to repay the loan, the house would be sold by the lender. The lender would recovers due payment and pays to the balance amount to the legal heirs.
• Valuation of the residential property would be conducted in at least once in 5 years by the reverse mortgage lender.
• Foreclosure of the loan also possible but it attracts penalty also.

In these days, at the time of retirement it is new tool available to the senior citizen get cash income stream and they can also stayed in their mortgaged home. It is ideal for those persons who is house rich and cash poor.

It is very vast subject and not very popular in our country. The country’s largest life insurance company LIC is also entering in the RML market. Now we can hope it will reach to the maximum needy people.

If you want more information regarding investment or you have any other query about investment feel free to ask us.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in

National Pension Scheme

National Pension Scheme

In earlier days, only government employees were eligible for life time pension after retirement. After demise of employee, the pension continues to his/her spouse and dependent children. With the passing of time, due to the increasing no. of retired Govt. employee the liability of the government has increased tremendously. It has felt across the world. Increase in life expectancy age and better medical facility the expected increased liability, defined pension proved like a ticking time bomb for Indian government. 

The defined benefit pension means guaranteed pension or the pre decided pension benefits or fix benefits. After the report of three different studies, the defined contribution pension system has been replaced. On the basis of these studies, the NPS (New Pension Schemes) was made mandatory for central govt employees except the Armed forces with effect from 1st January, 2004. 

In our country, only 12% the working population covered under pension schemes. To cover the large no. of population for pension benefit, NPS has opened for all Indian citizen between age of 18 and 60 with effect from 1st May 2009. The name has been changed from New Pension Scheme to National Pension Scheme.

The main features and architecture of NPS:

• PFRDA (Pension Fund Regulatory and Development Authority) issues the investment guidelines for investment and manage the fund. It is regulatory authority for NPS.

• NPS has a two tier structure. Tier-1 account does not allow premature withdrawal and it is mandatory for all Govt. employees joining after 1st Jan, 2004. Tier-2 account is withdrawable account. Individual can make withdrawal prior retirement without telling any reason. To open Tier-2 account, Tier-1 account is mandatory. The monthly contribution would be 10% of the salary and DA to be paid by the employee.

• The minimum amount per contribution Rs 500 per month and one should invest at least once in a year. The minimum annual contribution is Rs 6000 in each subscriber account.

• If unable to deposit minimum annual contribution, a penalty of Rs 100 would be levied and account would be dormant. A dormant account would be closed when the account value falls. For re-active the account, subscriber have to pay minimum annual contribution amount and penalty.

• The normal exit option is available at or after the age of 60. At the time of exit, the individual would be required at least 40% corpus to purchase annuity. If any individual decide to exit prior age 60, then 80% corpus mandatory to purchase annuity. In case of subscriber’s death, the whole 100% available amount will be given to nominee.

• NPS scheme has lowest cast model in the world. The fund management charge is 0.0009% of the total AUM managed. The fund managed by 8 different fund houses with the help of professional fund managers. LIC , SBI and UTI manage the government employees and other subscriber’s  funds. HDFC, ICICI, Kotak Mahindra, Reliance and DSP BlackRock fund houses manage only non-govt subscriber’s funds. NPS allows to subscribers to switch from one fund house to another fund house.

• NPS offers two broad approach to invest. First is Active choice and the other is Auto choice. In Active choice, the subscriber will decide the asset classes for investment. In Auto choice, the funds will be invested according to life cycles of subscriber. Asset allocation would be change based on age of subscriber automatically in this option.

These are the main features which we have discussed. The article has been a bit lengthy. For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in