What is Swavalamban Pension Yojana?
As a means to make senior citizens of the unorganised sector financially secure and independent, the Government of India has launched several pension schemes from time to time. The Swavalamban Pension Yojana or the NPS Swavalamban was one such endeavour. Moreover, this scheme was directed towards the unorganised sector of India aimed at helping them manage their finances successfully.
The Swavalamban Scheme was a government-backed, micro-pension plan monitored by the Pension Fund Regulation and Development Authority or PFRDA. It was launched in the year 2010 to encourage the habit of savings for retired life.
The features and components of the pension plan further facilitated the process of building a strong retirement corpus and helped investors to become financially secure and self-reliant post-retirement.
Under Swavalamban Pension Yojana, the minimum investment amount was Rs. 1000 per annum, whereas, the maximum amount per annum was Rs. 12,000. Further, the Indian Government contributed a sum of Rs. 1000 per annum in all active Swavalamban Scheme accounts for 5 years.
Its introduction also saw an achievement of the most number of applicants for a pension scheme on its very first day. Additionally, by the year 2014, over 35 lakh individuals had subscribed to this pension plan and benefitted accordingly.
Notably, this scheme was discontinued from 2016 and was replaced by a more comprehensive retirement-friendly plan named Atal Pension Yojana.
Features of the Swavalamban Scheme
- Investment amount
With a minimum sum of Rs. 100, eligible candidates could open an account under the Swavalamban Pension Scheme. Additionally, investors didn’t need to contribute to their pension account annually. However, a minimum of Rs. 1000 and a maximum deposit of Rs. 1200 each year attracted a contribution of Rs.1000 per annum from the government.
- Dependence on bank
The Swavalamban Pension Yojana was not entirely dependent on a bank account. However, individuals with a bank account were at a greater advantage. It was because the investment was routed through bank accounts.
Unlike saving plans like FD and PPF, the rate of returns applied to Swavalamban Pension Yojana was not fixed mostly because it was a market-linked scheme and its returns were largely dependent on its forces.
- Target beneficiaries
The benefits of this pension plan were targeted, especially towards the economically weaker sections of India. For example, farmers, self-employed and individuals belonging to the labour class were its primary target.
- Funding and tax benefit
The grants received by the Government of India were used to fund this pension scheme. Also, investors were entitled to avail tax benefits under this scheme. To elaborate, the amount availed at withdrawal was entirely exempted from tax.
- Investment pattern
There was no maximum or minimum limitation on the amount of contribution directed towards Swavalamban Pension Yojana. Investors were free to deposit as low as Rs. 100 into this scheme per month. Additionally, they had the liberty to contribute as many times they intended to in a given year.
|Sum of investment||Minimum Rs. 1,000 p.a. and maximum Rs. 12,000 p.a. plus Rs. 1,000 annually from the government’s fund.|
|Dependence on the bank account||Useful during withdrawal.|
|Target||Unorganised sector of the country.|
|Returns||Assured returns influenced by market forces.|
|Funding and tax benefits||Backed by the government and available for tax exemptions.|
|Pattern of investment||No maximum or minimum requirement.|
|Statement of transactions||Annual hard copy.|
|Diversification breakup||15% in equity shares, 55% in government securities and 40% in corporate bonds.|
- Diversification of investment
As much as 15% of the total sum of money was to be invested in the equity market, while 55% of it was invested in government securities. Further, the rest 40% were put into corporate bonds. This feature turned out to be effective for account holders and enabled them to diversify the burden of risk significantly.
- Statement of transaction
Swavalamban Pension Yojana account holders received a hard copy of their statement of transactions annually. It was considered to be a vital tool to track the details of each contribution made and further provided a fair idea about the corpus built.
- Nominee facility
Accountholders were also allowed to avail the nominee facility extended under this pension scheme. Notably, it came with two options, wherein, nominees were at liberty to either claim the accumulated amount of money in a lump sum or continue it as per norms.
These attractive features played a significant role in mobilising individual savings towards building a sizable retirement fund. To further understand how it facilitates the same, one must take a quick look at the scheme’s benefits.
Benefits of Swavalamban Pension Scheme
Here’s how Swavalamban Yojana benefited its subscribers –
- Diversified risk factor: This scheme was closely monitored by the PFRDA, which ensured transparency in dealings and adherence to investment-oriented norms. In turn, it extended assured returns and offered substantial scope to generate income. This aspect was considered to be one of the major factors that made Swavalamban Yojana a safe retirement-oriented investment plan.
- Minimal investment amount: Since there was no fixed monthly contribution and pre-decided investment frequency, it enabled individuals to contribute money towards the scheme as per their convenience.
Further, it allowed account holders to generate income from an investment of as little as Rs. 1000 per month. This minimal contribution requirement made it a favourable investment plan for individuals with limited means.
- Tax benefits: Also, the amount of money received on maturity was fully exempted from tax, thus helping maximise the returns. In turn, it protected individuals’ savings from eroding.
Application Process for Swavalamban Pension Yojana
Interested individuals had to follow these following steps to complete the enrolment process for Swavalamban Pension Yojana –
- They had to fill up the NPS-Swavalamban application form that was available both online and offline.
- Applicants had to attach essential KYC documents serving as proof of identity and address.
- Individuals were required to deposit a minimum amount of Rs. 100 at the time of registration.
- Next, they had to submit their application form along with the required set of documents to the nearest aggregator.
- They also had to make a minimum contribution to complete the registration process.
Other than these, interested candidates also had the liberty to contact the aggregators through a toll-free number or via SMS to avail necessary Swavalamban Yojana Scheme details.
Suitability of Applicants for the Swavalamban Scheme
In a broad sense, the targeted beneficiaries of this pension scheme were individuals from the unorganised sector of the country. Nonetheless, to generate income from it, individuals were required to meet a few eligibility criteria like –
- Indian citizens between the age of 18 and 60 years.
- Not employed either by the State or the Central government frequently.
- Not employed by an autonomous body.
- Should not have been employed under either a state or the central government-owned public sector with enrolment to an employer-backed retirement scheme.
- Should not have been covered under any social security scheme that was formulated under the following laws –
- Employees’ Provident Fund and Miscellaneous Provisions Act, 1952
- The Jammu and Kashmir Employees’ Provident Fund Act, 1961
- The Seamen’s Provident Fund Act, 1966
- The Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948
- The Assam Tea Plantations Provident Fund and Pension Fund Scheme Act, 1955
The Swavalamban Pension Yojana was replaced in the year 2016 with an improved and more effective pension scheme known as the Atal Pension Yojana. Existing account holders of the pension scheme were allowed to switch to Atal Pension Yojana to retain their contributions earned from the government. It further, promised to facilitate the process of building a retirement corpus, while reducing the age bracket of investors from the range of 18–60 years to 18–40 years. Other than these, both schemes tend to share several similarities. Regardless, interested investors can check the existing pension schemes to make a more informed decision.
FAQs on Swavalamban Pension Scheme
- How many times did one have to contribute towards their account under the Swavalamban scheme?
There was no such limit on the frequency or amount of contribution under the pension scheme.
- Does the Swavalamban Pension Scheme allow premature withdrawal?
Yes, investors/their nominees were allowed to withdraw from their respective account in 3 cases –
- At the age of 60 years,
- Before 60 years of age but on meeting certain conditions,
- In the event of an investor’s death.
- Was the Swavalamban scheme good for the long-term?
Yes, the scheme proved most beneficial in the long-term as it allowed account holders to generate more wealth.