Decoding Pradhan Mantri Shram Yogi Maan-dhan pension plan

  • Pradhan Mantri Shram-yogi Maandhan scheme, which is for 10 crore unorganised workers, comes with riders
  • If you are covered under any existing pension plans such as NPS, ESIC or EPFO, you will not be eligible. Also, all taxpayers are excluded

Mumbai: The new pension scheme, Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM), announced in the interim budget for unorganised workers has now been rolled out. It guarantees a monthly pension amount of Rs. 3,000 from the age of 60 years. However, the scheme, which aims to cover 10 crore unorganised workers, is not for everyone as it has multiple conditions in terms of eligibility. Here is a look at the product and how it works:

What is on offer?

You can apply for the plan only if your monthly income is Rs. 15,000 or less and you are between the age of 18 years and 40 years. If you are covered under any existing pension plans and products such as the New Pension Scheme (NPS), Employees’ State Insurance Corporation (ESIC) scheme or Employees’ Provident Fund Organisation (EPFO), you will not be eligible. Also, all taxpayers are excluded. You will have to make a monthly contribution and the amount varies depending on your age at the time of enrolment. (see table) The government will also make an equal monthly contribution. If you fail to contribute every month, you have to pay a penalty.


According to the Union labour ministry, if a subscriber has not paid the contribution continuously, they will be allowed to regularise their contribution by paying their entire outstanding dues, along with penalty charges, if any. I f you exit the scheme before completing 10 years, the share of only your contribution will be returned with the savings bank interest rate payable. Currently, savings bank account interest rate at large banks is around 3.5-4%.

If you exit the scheme after 10 years, but before the retirement age, you will receive the share of your contribution along with an accumulated interest as earned by the fund or the savings bank interest rate, whichever is higher. In case of death, your spouse can continue with the scheme by paying the regular contributions or may also exit the scheme and get the contribution amount along with interest. “If the spouse chooses to exit the scheme on the death of the subscriber, which may happen before or after completion of 10 years, the amount received will still be calculated with added benefits," said Lovaii Navlakhi, founder of International Money Matters Private Ltd. If there is an early exit, the government’s share of contribution will be credited back to the pension fund. “It might look a little unfair. The government is trying to discourage early exit from the scheme," said Dilshad Billimoria, director at Dilzer Consultants Private Ltd.

How to enrol?

You need to have a phone, savings bank account and Aadhaar. You have to visit the nearest Common Services Centres (CSC egovernance Services India Limited) and enrol for PM-SYM using Aadhaar and savings bank account or Jandhan account number. The money will be auto-debited. Contribution amount for first month shall be paid in cash for which you will get a receipt.

The Math

To give you Rs. 3,000 per month from the age of 60, the government will have to expect at least 8% returns. “If the amount invested by at 18 years is Rs. 55/ month, then with an equal contribution by the government it will earn an interest rate of 8% per annum (p.a). The corpus at 60 years will be Rs. 4.53 lakh," said Navlakhi. “If the corpus earns 2-3% over inflation rates and a pension of Rs. 3,000 a month is paid out, it will be 15-16 years before the government has to dip into capital. As long as life expectancy is 75 years or below, even an average investment performance will not add to the government’s deficit." Instead of 8% p.a, if the investment earns 9% p.a for the next 42 years, the corpus can last 21-24 years and life expectancy of 81-84 years will be supported.

However, he further said, for those who are older (aged 40), 200 contribution will accumulate to 2.67 lakh at 60 (at 9% p.a) and the corpus will last eight years at 2-3% p.a over inflation. For this scheme Life Insurance Corporation of India will be the pension fund manager and be responsible for pension pay-out. Moreover, the 3,000/month amount is too low and will not make any major impact.