 "Budget 2025: Govt plans NPS reforms to boost pension cover for gig workers")
The National Pension System (NPS) was introduced by the Union Government in 2004 with the aim of developing a universal pension system. Initially designed for central government employees, the NPS was subsequently expanded in 2009 to include self-employed individuals and those working in the private sector through the corporate and all-citizen models.
Later in June 2015, the Union Government launched the Atal Pension Yojana to extend coverage to the large unorganised sector, which consists of approximately 550 million people. These workers often lack access to social security benefits like pensions and health insurance, and the APY aims to address this gap.
How effective is the Atal Pension Yojana?
NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and had over 80 million subscribers at the end of December 2024. It has over Rs 13.7 trillion in assets under management (AUM). Of them, there are 61.4 million Atal Pension Yojana subscribers with an AUM of Rs 42,000 crore.
Currently, the subscribers of Atal Pension Yojana between the ages of 18 and 40 years receive a minimum guaranteed pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000, or Rs 5,000 per month upon reaching the age of 60, depending on their contributions for the chosen pension amount. The benefit of a minimum pension is guaranteed by the government, as it contributes 50 per cent of the contribution amount or Rs 1,000 per annum, whichever is lower, for a period of five years.
Will the govt raise the pension amount?
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However, various news reports indicate that the government is now considering hiking the minimum pension amount under the Atal Pension Yojana in the upcoming budget to benefit millions of informal workers.
Earlier, the PFRDA had written to the government requesting an increase in the guaranteed pension amount under the scheme as the current amount may not be attractive enough for potential subscribers to enroll in the scheme.
“In the case of guaranteed pensions, the government has to make budgetary proposals. If the pension amount is increased, the funding must also be increased. The promise has to be backed by actual money. It is true that the current guaranteed amount may not retain the same value after 20 years, when the pensioners will start getting their first pension tranche,” says labour economist K R Shyam Sundar.
Will Atal Pension Yojana be revamped?
In the Union Budget 2019, the government also launched Pradhan Mantri Shram Yogi Mandhan (PMSYM) as a plan to provide old age pension for the unorganised informal sector employees. However, the scheme did not evoke enough interest from the workers. As of December 2024, merely five million subscribers were enrolled in the scheme, as against 100 million subscribers.
Hence, there is a possibility that the government will make the currently running Atal Pension Yojana more attractive under the ambit of NPS.