IBPS Test 19

The Atal Pension Yojana and the National Pension System represent the two most important pillars of India's pension architecture, designed to provide retirement income security to different segments of the population and collectively addressing the challenge of an aging society with inadequate pension coverage. The National Pension System was introduced in 2004 for central government employees joining service after January 2004, replacing the defined benefit pension system with a defined contribution scheme. Under the NPS, both the employee and employer contribute specified percentages of salary to the individual pension account, which is invested in market-linked instruments across equity, corporate bonds, and government securities asset classes. The returns depend on the investment performance of the chosen funds, and at retirement the subscriber must use a minimum portion of the accumulated corpus to purchase an annuity providing regular pension income, while the remaining amount can be withdrawn as a lump sum. The NPS was subsequently extended to state government employees and opened to all Indian citizens under the Swavalamban and later All Citizens Model on a voluntary basis. The Pension Fund Regulatory and Development Authority was established to regulate and develop the pension sector, overseeing pension fund managers, ensuring transparency in investment management, and protecting subscriber interests. The Atal Pension Yojana was launched in 2015 to provide a guaranteed monthly pension of one thousand to five thousand rupees to workers in the unorganised sector upon reaching the age of sixty, funded by subscriber contributions during their working years. The scheme was designed with the recognition that the vast majority of India's workforce is employed in the informal economy and lacks access to any formal pension arrangement. The central government co-contributed fifty per cent of the subscriber's contribution for the first five years for subscribers who joined before a specified date, providing a significant incentive for early enrolment. APY is available to all bank account holders aged between eighteen and forty years who are not income taxpayers, and subscribers make monthly contributions that are automatically debited from their linked savings accounts. The guaranteed pension feature distinguishes APY from the NPS, providing certainty about retirement income that market-linked products cannot offer. The role of digital infrastructure in pension enrolment and management has grown significantly, with e-NPS enabling online account opening, contribution, and investment switching without requiring physical branch visits. The development of a secondary market for annuities and the introduction of innovative annuity products by insurance companies has improved the options available to NPS subscribers for converting their accumulated corpus into retirement income.