The scheme, being sold by Life Insurance Corporation, provides for pension options of monthly, quarterly, half-yearly and yearly frequency, resulting in return of around 8.3 per cent. It is available till May 3, 2018, for citizens aged 60 years and above.
Finance Minister Arun Jaitley on Friday launched a senior citizens’ pension scheme called the Pradhan Mantri Vaya Vandana Yojana (PMVVY), which promises assured annual return of 8 per cent for 10 years. The scheme, being sold by Life Insurance Corporation, provides for pension options of monthly, quarterly, half-yearly and yearly frequency, resulting in return of around 8.3 per cent. It is available till May 3, 2018, for citizens aged 60 years and above. Jaitley said the scheme will provide social security to senior citizens by offering decent return, especially at times when overall interest rates were falling.
“There is a critical balance which we have to maintain. We live in a world where for the efficiency of the economy our banks and other institutions are expected to lend at an affordable rate and if the lending rates go down, obviously, borrowing (rates) are also impacted, that is considered essential and inevitable for an efficient economy. But it then throws an incidental problem, which is also very important issue to be addressed, which is that the senior citizen, really, want a no risk investment and they want (it to be) non-fluctuating,” he said while launching the scheme.
“They want a reasonable rate of return because not being gainfully employed at that age, they want the security which fixed income can bring them and therefore in this balance this is a scheme which was announced by the Prime Minister, which ensures a real return of 8.30 per cent, which in today’s world of reducing interest rate is fairly respectable rate of return particularly for senior citizens and it is exempted from service tax or GST,” he added.
If there is a shortfall between the actual return earned under the scheme and the guaranteed return of 8.0 per cent then the government will subsidise LIC for it. Premature withdrawal from the scheme is possible in case the money is required for the treatment of terminal or critical illness of the person or spouse. In this case, 98 per cent of the amount invested will be refunded.
On survival of the pensioner to the end of the policy term, purchase price along with final pension instalment shall be payable. In order to meet liquidity, the scheme allows availing loan up to 75 per cent of purchase price after 3 policy years. Interest on loan can be paid from the pension instalments while the loan amount can be paid from the claim proceeds.
A minimum yearly purchase of Rs 1.44 lakh is allowed while maximum yearly purchase permitted is Rs 7.22 lakh, which will yield minimum yearly pension of Rs 12,000 and Rs 60,000 respectively. The ceiling of maximum pension is for entire family, comprising the pensioner, his/her spouse and dependants. LIC, which started selling the scheme from May 4, 2017, has so far sold 58152 policies and collected premium of Rs 2705 crore from PMVVY.