Senior citizen pension scheme extended: The Union Cabinet on Wednesday has extended Pradhan Mantri Vaya Vandana Yojana (PMVVY), a pension scheme for those who are above 60, for a period of three years. The social security scheme for senior citizens will be valid until March 2023.
The government has fixed its annual rate of return at 7.4% for the financial year 2020-21. The government allowed will reset the interest rate every year, according to an official release. That interest rate was lower compared to 8 percent for the previous financial year, which ended on March 31, 2020.
#Cabinet approves extension of ‘Pradhan Mantri
Vaya Vandana Yojana’ (#PMVVY) up to 31st March, 2023 for further period of three years beyond 31st March, 2020; This to enable old age income security and welfare of Senior Citizens#CabinetDecision
— K.S. Dhatwalia (@DG_PIB) May 20, 2020
In Union Budget 2018-19, the government had extended the scheme up to March 2020 with an assured return of 8 percent and also doubled the investment limit per senior citizen to Rs 15 lakh.
According to the official release, the Cabinet approved an annual reset of the assured rate of interest with effect from April 1 of the financial year, in line with the revised rate of returns of Senior Citizen Savings Scheme (SCSS) up to a ceiling of 7.75 percent, with a fresh appraisal of the scheme on breach of this threshold at any point.
The income security scheme for senior citizens is implemented through the Life Insurance Corporation (LIC).
It intends to give an assured minimum pension to senior citizens (60 years and above) based on an assured return on the purchase price/subscription amount.
The government’s financial liability is limited to the extent of the difference between the market return generated by LIC and the guaranteed return of 7.4 percent per annum initially for the year 2020-21, and thereafter to be reset every year in line with the Senior Citizen Savings Scheme.
What is Pradhan Mantri Vaya Vandana Yojana?
This scheme offered by Life insurance Corporation (LIC) of India gives a guaranteed payout of pension at a specified rate for 10 years. It also offers a death benefit in the form of the return of purchase price to the nominee.
Maximum investment: One can invest a maximum amount of ₹15 lakh under the Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme. The tenure of the policy is set at 10 years.
Press Information Bureau (PIB) states the following important details of the pension scheme.
- To allow initially an assured rate of return of 7.40 % per annum for the year 2020-21 per annum and thereafter to be reset every year.
- Annual reset of the assured rate of interest with effect from April 1st of the financial year in line with the revised rate of returns of Senior Citizens Saving Scheme (SCSS) up to a ceiling of 7.75% with a fresh appraisal of the scheme on breach of this threshold at any point.
- Approval for expenditure to be incurred on account of the difference between the market rate of return generated by LIC (net of expenses) and the guaranteed rate of return under the scheme.
- Capping Management expenses at 0.5% p.a. of funds of the scheme for the first year of scheme in respect of new policies issued and thereafter 0.3% p.a. for the second year onwards for the next 9 years.
- Delegating the authority to Finance Minister to approve the annual reset rate of return at the beginning of every financial year.
Eligibility criteria and other conditions:
- Minimum entry age: 60 years (completed)
- Maximum entry age: No limit
- Policy term: 10 years
- Minimum Pension: Rs 1000 per month
- Maximum pension: Rs 10000 per month. The total amount of pension allowed per senior citizen should not exceed the maximum pension limit.
Mode of pension payment
The modes of pension payment are monthly, quarterly, half-yearly and yearly. The pension payment is processed through NEFT or Aadhaar Enabled Payment System. Thus, depending on the mode of pension payment, that is, monthly, quarterly, half-yearly or yearly, the first installment of pension will be paid after a month, three months, six months, or a year from the date of purchase of the scheme respectively.
The scheme can be purchased by investing a lump sum in the PMVVY pension scheme in the following manner, according to which you will get the pension income.
As per PIB release, “The minimum investment has also been revised to Rs 1,5 6,658 for a pension of Rs 12,000/- per annum and Rs 1, 62,162/- for getting a minimum pension amount of Rs 1000/- per month under the scheme.”
You can buy the PMVVY pension scheme from Life Insurance Corporation of India (LIC) of India. You can purchase the scheme either offline or online. If you want to purchase it offline, you must visit the nearest LIC office. However, if you want to purchase the annuity scheme online, log on to the website of LIC – www.licindia.in.
Points to note
Maturity benefit: If the pensioner survives till the end of the policy term of 10 years, the purchase price of the annuity along with the final pension installment will be payable to the policyholder.
Death benefit: If the pensioner dies during the policy term of 10 years, the purchase price of the annuity scheme will be refunded to the beneficiary.