Fine-tuning financial inclusion

Mass insurance schemes, usually targeted at below-poverty-line beneficiaries, have several built-in advantages

Three mass insurance schemes were introduced in the year 2015 under the financial inclusion objectives of the Government of India meant for people from the low-income group as well as the unorganised sector.

These were a life insurance scheme called Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), an accident insurance scheme called Pradhan Mantri Suraksha Bima Yojana (PMSBY), and a pension scheme Atal Pension Yojana (APY). These and other insurance schemes were under the umbrella of the Pradhan Mantri Jan Dhan Yojana (PMJDY).

Atal Pension Yojana, introduced as Varishtha Pension Bima Yojana, was in the news last week because from October 1, taxpayers, past or present, cannot open new accounts.

This will narrow the eligibility for the scheme to low-income individuals who were the core targets, especially from the unorganised sector, as they do not have access to other pension schemes offering guaranteed retirement pensions.

To recap the profile of the scheme, individuals between 18 and 40 years of age can join the scheme that offers a monthly minimum guaranteed pension after age 60, of ₹1,000-5,000, depending on the contribution.

Administered by the Pension Fund Regulatory and Development Authority (PFRDA), there was also an attractive co-contribution by the Government of India for the first five years for those who joined the scheme from June 1, 2015, to March 31, 2016. This contribution was 50% of the subscriber’s own contribution up to a cap of ₹1,000 per year and was meant only for those not covered by any Statutory Social Security Schemes and who were not income taxpayers.

This was an introductory incentive for the first five years of joining the scheme.