Elderly retired people looking forward to a fixed pension amount can now avail of the benefits of the Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme by the Life Insurance Corporation of India (LIC). This fixed pension scheme for senior citizens is now considered a better investment choice than fixed deposits.
This year, the government has fixed the pension rates at 7.40 per cent per annum. However, senior citizens looking to avail of this scheme must buy it by March 31, 2022, which means that they have only three more days to park their money in this scheme. The pension outflow is monthly for 10 years, which means that this assured pension rate will be paid every month during the entire policy tenure of 10 years for all policies bought till March 31, 2022.
The policy will be on offer till March 31, 2023, though the Ministry of Finance, Government of India will review and approve the pension rate for the policies sold till that date. The pension scheme and rates are reviewed, revised and approved at the beginning of every year. The total purchase price under this scheme must not exceed ₹15 lakh.
The minimum pension promised under the PMVVY scheme are as follows:
- ₹9,250 per month
- ₹27,750 every quarter
- ₹55,500 every six months
- ₹1,11,000 per year.
PMVVY eligibility and benefits
- The minimum entry age of this age is 60 years while there is no maximum age limit to the same.
- The policy tenure is 10 years.
- Currently, the scheme gives a guaranteed monthly pension payout of 7.40 per cent per annum.
- Subscribers to this policy scheme, if they survive the entire tenure, will be paid a pension in instalments at the end of each year.
- The beneficiary is redeemed the policy price if the policy subscriber dies during the 10-year policy period.
- If the policyholder survives the entire policy period, the purchase price along with the last pension instalment will be credited to his or her account.
- Policyholders must choose the mode of pension depending on which they can seek monthly, quarterly, half-yearly or yearly pension payments.
- Policyholders buying this scheme through the web are allowed a 30-day free look period. However, those buying it through the offline mode are entitled to a 15-day free look period.
- Policyholders are allowed to withdraw the purchase amount in between in case of emergencies. However, in such cases, the surrender amount is 98 per cent of the purchase price. However, the entire purchase price is payable if the policyholder commits suicide.
- Policyholders can also avail of a loan after three years using this pension scheme as collateral. The maximum loan amount that can be authorized is 75 per cent of the purchase price.
Many people are confused regarding pension schemes as very few of them offer fixed pension rates. This has resulted in many insurance pension policies offering pension payouts at interest rates as low as five to six per cent.
With market volatility sucking out the peace and confidence of most investors, this scheme comes as a saviour to the risk-averse elderly looking for guaranteed pension amounts after they retire. Launched in May 2020, this scheme is best suited to senior citizens planning for a secure future. What’s more, the policyholders or their beneficiaries are entitled to the entire purchase price after 10 years depending on their survival during the policy period.