Atal Pension Yojana Account: If you fail to pay monthly payments, what would happen?

The Atal Pension Yojana (APY) was introduced in 2015 to provide a guaranteed pension of up to Rs 5,000 to its subscribers. The scheme offers five fixed pension options: Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000, and Rs 5,000. Individuals aged between 18 and 40 can enroll in the scheme, ensuring a secure pension upon reaching 60 years of age.

Initially, the APY was available to all resident Indian citizens, regardless of their tax status. However, starting in 2022, only non-taxpayer citizens are eligible to join. Existing APY account holders who are taxpayers and enrolled before October 1, 2022, can continue their contributions. After this date, individuals who are or have been taxpayers are not permitted to open new APY accounts.

The Atal Pension Yojana (APY) is designed as a retirement income security program for individuals aged 18-40 who do not pay income tax. This scheme aims to mitigate longevity risks for those working in the informal sector by encouraging them to save for retirement voluntarily. The program primarily targets low-income individuals, the underprivileged, and those in the unorganised sector.

APY is a voluntary pension scheme that gives subscribers the option to select their payment frequency from monthly, quarterly, or half-yearly intervals. Contributions to APY are collected through auto-debit directly from subscribers' bank accounts, as stated on the National Pension System (NPS) Trust website. 

Monthly deductions are made on any date within the month, while quarterly or half-yearly deductions occur on any day within the first month of the respective period.

What if miss paying the contribution

In the event of a delayed payment, subscribers are required to pay both overdue interest and charges for the period that extends beyond the due date.

Overdue Interest: It is worth mentioning that the overdue interest paid by a subscriber along with delayed installments will be added to the APY account and will contribute to the pension fund.

Charges for Delayed or Non-Payment of Contribution: Subscribers are liable to pay penalty charges for failing to maintain the necessary balance in their bank account for APY contributions. The amount of charges depends on the contribution amount and the duration of the delay.

Charges for delayed or non-payment of contributions (tax not included)

Contribution Per Month Penalty

Up to Rs 100 Re 1

Between Rs 101 and Rs 500 Rs 2

Between Rs 501 and Rs 1,000 Rs 5

Rs 1,001 and above Rs 10

If there is a delay in contributions of Rs 1,500 for a month, the bank will collect Rs 10 as a penalty. For delays of more than one month, a charge of Rs 10 will be imposed for each month of delay. The monthly charge increases as the contribution amount increases.

What does the govt say

As per the NPS Trust website, an APY account remains open regardless of any delays in contributions from the subscriber. In the event of non-payment, subscribers have the opportunity to reactivate their account by settling any overdue interest, with account maintenance and other charges automatically deducted from the account balance.

Therefore, having an APY account ensures it will not be closed due to payment delays. Subscribers can easily reactivate their account by addressing any outstanding interest and making timely contributions to keep the account active.

What can be done

To avoid these penalties, it is recommended that subscribers maintain sufficient funds in their bank accounts during the deduction period or the month when the payment is due. Additionally, subscribers can opt to change their payment frequency from monthly to quarterly or semi-annually, or vice versa, to better align with their income frequency.

Early Withdrawal (Prior to turning 60 years old)

In the event that a subscriber chooses to exit the scheme before reaching 60 years of age, they will receive a refund of their contributions to APY, along with the actual accrued income earned on those contributions after deducting account maintenance charges.

It should be noted that subscribers who enrolled in the scheme before March 31, 2016, and have received the Government Co-Contribution will not receive the same, including any accrued income earned on it.