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Retirement is a dream for individuals with sizeable savings and a retirement fund to meet the financial needs of old age. Retirement planning can be relatively easy for financially well-off people, but it can be a struggle for those who belong to the unorganized sector. This is where low cost pension schemes such as NPS Swavalamban Scheme also known as the NPS Lite Scheme can make a difference.
We’ll be telling you more about the scheme today, including what it is, its features and benefits and all the necessary details of the Swavalamban Yojana Scheme.
What is Swavalamban Scheme?
Swavalamban Scheme was launched by the Government of India to support senior citizens in the unorganized sector become financially reliant and live their retirement life without worries. It is one of the many pension schemes introduced by the Government as an alternative to the National Pension System (NPS) that provides financial benefits to retired individuals of the underprivileged section. This National Pension Scheme variant is monitored by the Pension Fund Regulation and Development Authority (PFRDA) similar to other NPS models.
Features and Benefits of the Swavalamban Scheme
Here are the features and benefits of the Swavalamban Scheme:
1. Investment:
Individuals eligible to invest in the pension scheme can invest a minimum amount of INR 100 to open a Swavalamban account. In addition, the scheme requires a minimum investment of INR 1000 and a maximum of INR 12000 every year to avail benefits of NPS Lite. A contribution of INR 1000 is made by the Government.
2. Can Be Set up with a Bank Account:
Even though it is not necessary for the subscriber of a Swavalamban Scheme to set up a bank account with the scheme, however, the scheme does allow this feature. Setting up a bank account with the Swavalamban Scheme is beneficial if you want to make quick and hassle-free withdrawals.
3. Market Linked Returns:
Swavalamban Pension Yojana invests in market-linked instruments. Consequently, the
returns will entirely depend upon the amounts contributed and the investment growth as per the performance of the assets. These assets include equity assets, making it one of the leading retirement plans that can offer you high returns in the long run.
4. Investment Diversification:
As established before, the NPS Swavalamban Scheme invests in market-linked instruments. These instruments include equity, government securities and corporate bonds in India. While 15% is invested in equity, 55% and 40% are invested in government securities and corporate bonds, respectively. Consequently, allowing the investor to diversify their investments to earn high returns and minimize risk.
5. Tax Benefits:
Swavalamban Scheme offers tax benefits to investors. The investor or the subscriber is not required to pay tax on the amount withdrawn from the scheme. The tax benefits are applicable as per Section 80CCD the Income Tax Act of 1961.
Related Topic: NPS Tax Benefits
6. Transparency:
Investing in an authentic and genuine investment cum savings scheme is essential to ensure investment safety. Swavalamban Scheme is regulated by the PFRDA (Pension Fund Regulation and Development Authority of India. This governing body is responsible for monitoring the scheme. This can include maintaining transparent investment norms and enabling performance reviews of fund managers.
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Eligibility Criteria
An individual should meet the following eligibility criteria to participate in the scheme:
- Individuals who fall between the age bracket of 18-60 years can participate in the pension scheme.
- They should also be Know Your Customer (KYC) compliant to start investing in the scheme.
- They should be a citizen of India. NRIs are not eligible to participate in the scheme.
- The individual should not be subscribed to any other social security scheme like the Employees’ Provident Fund, The Coal Mines Provident Fund, the Miscellaneous Provision Act, etc.
Withdrawal/ Exit Rules
As a general rule, an individual can withdraw or exit from the scheme at the age of 60 under Swavalamban Scheme. However, premature exits are also permitted under some conditions.
Following are the withdrawal cum exit rules of the Swavalamban Scheme for on-time, premature withdrawals, and death benefits:
1. On-time Withdrawals:
The subscribers who wish to withdraw from the scheme at 6o must invest 40% of accumulated savings (pension wealth) in an annuity. The annuity will be used to give a monthly pension of Rs.1000/ to the subscriber. If 40% of the corpus is insufficient to provide this pension amount, a higher percentage or the entire pension corpus would be used to purchase an annuity plan.
2. Exit Before 60:
If the subscriber wishes to make a premature exit, they will need to invest a minimum of 80 % of accumulated savings (pension wealth) to buy an annuity. The subscriber can withdraw the remaining percentage.
3. Withdrawal on Death:
The scheme comes with a death benefit. This means that in case of the untimely demise of the subscriber, the nominee will be paid the corpus value. In such an instance, the nominee can withdraw the full corpus by approaching the aggregator.
Also Read: NPS Withdrawal Rules
Conclusion
Swavalamban Scheme is a government-backed pension scheme specially designed for senior citizens in the unorganized sector. The scheme invests in market-linked instruments to offer you high returns. You can consider investing in the scheme if it aligns with your financial goals.
Frequently Asked Questions (FAQs)
Q1. Should I invest in the scheme for a longer duration?
A monetary investment into the scheme is an investment into your and your family’s future. Therefore, investing in the Swavalamban Scheme for a longer duration is always recommended if you prefer accumulating a sizeable corpus.
Q2. Is Swavalamban Pension Yojana better than a bank’s savings deposit?
Yes, the Swavalamban Scheme is a better option if you are the kind of investor who prioritizes high returns. However, if you prefer investment safety, the scheme might not be the right option as it invests in market-linked instruments, wherein returns are not guaranteed.
Q3. Is it safe to invest in the Swavalamban Scheme?
Apart from investing in equity, the Swavalamban Scheme also invests in government securities and corporate bonds. Consequently, the risk is minimized as the portfolio is diversified across non-equity assets.
Q4. How to open a Swavalamban Scheme account?
You need to contact the aggregator to open a Swavalamban. After that, you must submit the registration form and KYC documents and make a minimum contribution to complete the formalities.
Q5. How often can I invest in the scheme in a year?
There is no minimum or a maximum number of times you can invest in a year. You are free to invest any amount of deposit any number of times if you don’t exceed the maximum annual deposit limit.
Sources:
https://groww.in/p/savings-schemes/swavalamban-pension-yojana
https://www.npstrust.org.in/sites/default/files/Swav_FAQ.pdf
https://www.pnbindia.in/document/fi_swavalamban-nps.pdf
ARN No: Jan23/Bg/21A