The Atal Pension Yojana (APY) is primarily designed to provide financial security during retirement, with subscribers receiving a guaranteed minimum monthly pension after turning 60. However, many subscribers want to know whether they can take their money out before reaching retirement age.
The answer is yes, premature exit from APY is permitted, but leaving the scheme before 60 can affect the benefits you would otherwise receive. The refund amount also depends on whether you received any government co-contribution.
Here is a detailed look at the Atal Pension Yojana premature withdrawal rules, death benefits, pension payouts and other important points subscribers should understand before closing their APY account.
What Is Atal Pension Yojana?
The Atal Pension Yojana is a government-backed pension scheme administered by the Pension Fund Regulatory and Development Authority (PFRDA). It is intended to provide a guaranteed minimum pension to subscribers after they reach the age of 60.
Depending on the pension option selected, subscribers can receive a guaranteed minimum monthly pension of:
- ₹1,000
- ₹2,000
- ₹3,000
- ₹4,000
- ₹5,000
The pension amount depends on factors such as the selected pension slab and the contributions made during the subscription period.
Can You Withdraw Money From APY Before the Age of 60?
Yes, APY subscribers can voluntarily exit the scheme before turning 60.
However, premature withdrawal is different from completing the APY subscription period. If you voluntarily close your APY account before 60, you generally receive the contributions made by you along with the income earned on those contributions, after applicable account maintenance charges are deducted.
The major drawback is that you lose the guaranteed pension benefits that you could have received by remaining invested in APY until the age of 60.
Therefore, subscribers should carefully consider their long-term retirement needs before opting for an early exit.
What Happens to the Government Contribution on Early Exit?
The treatment of the government contribution is an important aspect of APY premature withdrawal.
Subscribers who joined APY on or before March 31, 2016 and received a government co-contribution should be particularly careful.
If such a subscriber voluntarily exits the scheme before turning 60, the government’s co-contribution and the income earned on that contribution are not refunded.
As a result, the amount received at the time of premature exit may be less than the total amount that accumulated in the APY account.
How Much Pension Do You Get From APY After 60?
The primary purpose of APY is to provide a regular income during retirement.
If you continue your APY subscription until the age of 60, you are entitled to the guaranteed minimum monthly pension corresponding to the pension slab you selected.
The available pension options are ₹1,000, ₹2,000, ₹3,000, ₹4,000 and ₹5,000 per month.
The selected pension is payable to the subscriber for life after reaching 60, subject to the applicable APY rules.
What Happens to the APY Pension After the Subscriber Dies?
APY also provides protection for the subscriber’s spouse.
After the subscriber dies, the same monthly pension is generally payable to the spouse, who is treated as the default nominee under the scheme.
The spouse can continue receiving the pension for life, subject to the applicable rules.
After both the subscriber and spouse have died, the accumulated pension wealth is payable to the nominee according to APY provisions.
What If the APY Subscriber Dies Before 60?
There are specific provisions when an APY subscriber dies before reaching 60.
The subscriber’s spouse may choose to continue the APY account by making the required contributions for the remaining period until the date on which the original subscriber would have reached 60.
If the spouse continues the account, the spouse can become eligible for the applicable lifelong pension after the original subscriber’s pension eligibility date.
Alternatively, the accumulated pension corpus may be returned to the spouse or nominee, as applicable under the scheme’s rules.
In the case of an unmarried subscriber, the accumulated corpus is returned to the nominee as per the applicable provisions.
How Can You Start Receiving APY Pension After 60?
Reaching the age of 60 does not mean that the pension automatically starts without any formalities.
Once the subscriber turns 60, a request for commencement of the APY pension needs to be submitted to the bank or post office through which the APY account is maintained.
After the request is processed, the subscriber begins receiving the applicable monthly pension.
The pension continues throughout the subscriber’s lifetime. Following the subscriber’s death, the spouse is generally entitled to receive the same pension under the APY rules.
Does Atal Pension Yojana Give a Lump-Sum Amount at Maturity?
APY should not be viewed as a traditional savings plan that provides the subscriber with a lump-sum maturity payment at the age of 60.
Its main objective is to provide a guaranteed minimum monthly pension after 60.
The accumulated pension wealth remains important because it forms the basis for benefits payable to the spouse and nominee in situations covered by the scheme.
After the death of both the subscriber and spouse, the nominee receives the applicable pension wealth in accordance with APY rules.
Things to Consider Before Closing Your APY Account Early
Although premature exit is allowed, subscribers should consider the long-term consequences before making a decision.
By exiting APY before 60, you may receive your eligible contributions and the income accrued on them, subject to applicable deductions and rules. However, you also give up the future guaranteed pension benefit associated with continuing the scheme.
Before opting for premature withdrawal, consider:
- Your immediate requirement for money
- The number of years remaining until you turn 60
- The pension slab you selected
- The benefits available to your spouse
- The benefits that may be available to your nominee
- Whether you received a government co-contribution
- The long-term impact of losing the guaranteed pension
For someone who does not urgently require the funds, continuing the APY account until 60 may provide greater long-term retirement security.
Atal Pension Yojana Premature Withdrawal: Key Takeaways
The Atal Pension Yojana allows voluntary exit before the age of 60, but premature closure comes with important consequences.
Generally, on voluntary exit, the subscriber receives their own contributions along with the income earned on those contributions, after applicable charges. However, for eligible subscribers who received the government’s co-contribution, the government contribution and income earned on it are not refunded when they voluntarily exit before 60.
Those who remain invested until 60 can receive a guaranteed minimum monthly pension of ₹1,000 to ₹5,000, depending on their chosen pension slab and applicable scheme conditions.
APY also provides benefits for the spouse and nominee in specified circumstances.
Therefore, before opting for APY premature withdrawal, subscribers should weigh their immediate financial requirement against the retirement income and family benefits they could lose by leaving the scheme early.
In short, APY allows early exit, but withdrawing before 60 should be considered carefully because it can mean giving up valuable long-term pension benefits.