Fixed deposits, post office savings programs, tax-free bonds, and other capital market products are all available to elderly people at the moment. In contrast to these deposit schemes, there is one that offers a pension when a lump sum payment is invested for a set length of time. The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a LIC-led scheme that provides a set monthly pension for ten years.
PMVVY Pension plan: Features
PMVVY is a pension plan for senior adults who are at least 60 years old. There is no upper age limit for the elderly.
The plan has a ten-year policy term with a monthly pension ranging from Rs 1,000 to Rs 9,250 for the whole time. The scheme is open for investment until March 31, 2023. However, LIC is guaranteeing a guaranteed 7.4% annual return on this scheme for the fiscal year FY22 if purchased before March 31, 2022.
According to LIC's website, "The Scheme would give an assured pension of 7.40 percent per annum, payable monthly, for the Financial Year 2021-22. This guaranteed rate of pension will be paid for the full ten-year insurance term for all policies purchased until March 31, 2022."
LIC, India's largest insurer, is the sole authorizer to run this scheme. The program can be bought with a one-time payment. A pensioner, on the other hand, will be able to choose between the amount of their pension and the purchase price. This scheme allows for a maximum investment of Rs. 15 lakh. Similarly, the scheme will give interest rates ranging from 7.4 percent to a maximum of 7.66 percent per annum, based on the various types of pension payments.
For example, a senior citizen can earn 7.4 percent on monthly installments, 7.45 percent on quarterly and half-yearly installments, and 7.52 percent on annual installments. In addition, the scheme offers 7.66 percent per annum for yearly installments.
Higher Interest Rates
When compared to many bank fixed deposits and post office savings programs, the PMVVY interest rate is higher.
The government-owned Senior Citizen Savings Scheme (SCSS) pays 7.4 percent interest, while SBI pays 6.30 percent interest on FDs under 2 crore with a tenor of 5 to 10 years to senior citizens. In addition, ICICI Bank and HDFC Bank give older citizens a 6.35 percent interest rate on loans with terms ranging from 5 years 1 day to 10 years. The pension payment must be made using NEFT or Aadhaar Enabled Payment System to invest in PMVVY.
The purchase of a policy under this government-subsidized scheme needs the authentication of a unique Aadhaar number. PMVVY provides a plethora of benefits. Pension in arrears (at the end of each period as per mode specified) will be paid if the Pensioner survives the policy term of ten years.
The purchase money will be reimbursed to the beneficiary if the Pensioner dies during the insurance term of ten years. Meanwhile, there is a maturity benefit available on the scheme, which pays the purchase price plus the final pension installment if the pensioner lives to the end of the 10-year policy term.
There is also a loan facility available under the system, but only after three policy years have passed.
The maximum loan amount is set at 75% of the purchase price. The rate of interest that will be charged on the loan amount will be set at regular intervals. Furthermore, PMVVY allows for early withdrawal throughout the policy term in extraordinary situations, such as when a pensioner needs funds to treat a serious or terminal sickness in themselves or their spouse. In such circumstances, the Surrender Value payable is 98 percent of the purchase price.
