New Delhi: India is looking to strengthen the social security net for informal workers amid rising living costs for retirees. Under the plan, the finance ministry, in consultation with the Pension Fund Regulatory and Development Authority (PFRDA), is considering doubling the assured pension ceiling under the flagship Atal Pension Yojana (APY) to up to ₹10,000 a month, according to three people aware of the discussions.
The proposal aims to boost fresh enrolments as well as retention in a scheme that now has 90 million subscribers but faces high drop-offs.
Launched in May 2015, the pension scheme focuses on informal sector workers and currently provides a guaranteed monthly pension of ₹1,000-5,000 after the age of 60 years, depending on the subscriber’s contribution slab.
With nearly half the enrolled subscribers discontinuing contributions over time, the government is examining a long pending demand to enhance the pension cap to up to ₹10,000 per month to make the scheme more attractive and aligned with rising living costs, according to the people cited above.
The scheme's gross enrolments in FY26 crossed 13.5 million, the highest ever in a single fiscal year since its launch.
“The government and the PFRDA are examining options to enhance the upper pension cap to around ₹8,000– ₹10,000 per month, aiming to make the scheme more attractive and aligned with rising living costs,” said one of the people cited above, requesting anonymity.
Co-contribution
Under the scheme's structure, the government provided a co-contribution in the initial years for subscribers enrolled before 31 March 2016. This support amounted to 50% of the subscriber’s contribution, capped at ₹1,000 per year, and was available for five years from FY16 to FY20. The benefit was limited to subscribers who were not income taxpayers and were not covered under any other social security scheme.
The second person cited above said that the proposed revision is expected to improve long-term retention, a key challenge. While the reach of the scheme has been robust, continuity in contribution is a concern due to income volatility among informal sector workers.
The government is also considering scaling up last-mile enrolments through ‘pension sakhis’ alongside business correspondents (BCs), while simultaneously addressing structural issues such as contribution continuity, said the third person in the know. “The proposed pension enhancement is being positioned not just as an incentive for fresh enrolments, but also as a lever to improve persistency and deepen financial security under APY,” this person said.
On 21 January 2026, the Union Cabinet approved continuation of the scheme till FY31, along with extension of funding support for promotional, developmental and gap-funding activities.
Queries emailed to the spokespersons of the finance ministry and PFRDA late Tuesday remained unanswered until press time.
No significant strain
Experts said any increase in the pension ceiling is unlikely to significantly strain government finances as the Atal scheme is largely subscriber-funded.
“APY is in the nature of a defined-contribution plan with a minimum defined benefit linked to the pension slab selected by the subscriber. Contribution amounts are invested by pension fund managers with a conservative asset allocation, where safety remains the primary objective of retirement savings," said Vivek Iyer, partner at Grant Thornton Bharat. “Given this structure, we do not see a material fiscal impact, as the scheme is largely self-funded by participants.”
Iyer added that the final numbers need to be assessed "for a clearer assessment”.
Rahul Singh, an associate professor of at O.P. Jindal Global University said the scheme has delivered strong outreach but faces persistency issues due to irregular incomes in the informal sector. “Enhancing pension ceilings can improve adequacy and attractiveness, align benefits with rising living costs, and support better long-term participation alongside ongoing awareness and inclusion efforts,” he said.