Good news! PFRDA may hike pension from Rs 5000 to Rs 10,000 under Atal Pension Yojana
Pension Fund Regulatory Development Authority (PFRDA) is seeking an actuarial opinion on whether there would be any shortfall on account of the minimum guaranteed pension under the Atal Pension Yojana (APY) scheme.
Such an exercise will pave the way for preparing a plan to have suitable provisioning for gap funding in the future. Also, while the maximum pension commitment under APY now is Rs 5,000 a month, the actuarial valuation exercise will also study the pension liability and feasibility for an increase of pension slab of minimum guaranteed pension amount to Rs 6,000, Rs 7,500 and Rs 10,000, PFRDA said.
While it is too early for having any shortfall, given that the scheme was launched just three years ago in May 2015, the PFRDA and the government are clearly not taking any chances, given that 1.08 crore subscribers have already enrolled and over Rs 4,500 crore has been collected.
PFRDA wants the yet to be appointed actuarial firm to establish the present and future financial development of the social security pension scheme.
The firm will be expected to provide an estimate to the government regarding the likely shortfall. The scope of valuation of APY will also cover the components for managing the additional impact of a defined benefits pension for a subscriber for life begins at the age of 60 years who joins at any age between 18 and 40 years, pension for the spouse and return of pension wealth to the nominee of amount from Rs 1.70 lakh to Rs 8.50 lakh.
A PFRDA document highlighting the scope of valuation said the actuarial firm will have “to study the liability on the Government of India with regards to the payout of defined benefit under the scheme” and will have to “develop and maintain an annual report to monitor the progress of the scheme and track the actuarial valuations and liabilities.”
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The actuarial firm valuation will use the mortality data for financial modeling and highlight how the investment of the subscriber will translate into an income on retirement and its future value of money impact on their remaining life.
All this is required to know the fund position vis- -vis the fixed pension liability. The actuarial firm valuation will also be tasked to assess the long-term financial sustainability of the scheme in relation to present contribution rates, co-contribution by the Centre or state government, upgrade/downgrade of pensions, temporary withdrawal from APY, exit due to voluntary or death and the pace of enrollment vs. potential uncovered population.
The PFRDA also wants the actuarial firm “to study the pension liability and feasibility for an increase of pension slab of minimum guaranteed pension amount to Rs 6,000, Rs 7,500 and Rs 10,000 and increase of entry age from 40 years to 55 years.”
Besides, they will also study the pension liability and feasibility for the introduction of flexi-term pension plan for 10 years, 15 years and 20 years vesting period with a minimum guaranteed pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 5,000, Rs 6,000, Rs 7,500 and Rs 10,000.
Source: DNA Money