Saturday, July 22, 2017

New Pension Scheme for senior Citizen with 8% Return:Pradhan Mantri Vaya Vandana Yojana (PMVVY)

On 20 July Minister of Finance Mr. Arun Jatelity has launched a Pension scheme for senior citizens (60 years and above) in which they will get a guaranteed interest of 8 per cent for 10 years. Financial planners say that this pension scheme will offer more avenues to senior citizens to earn steady regular income at a time of falling interest rates. The scheme is exempted from GST or goods and services tax.

Lets have brief major point for this scheme:

1) LIC started offering the scheme from May 4, 2017. Earlier this scheme was remain open till May 3, 2018 but now it has been extended to 21 March 2020. This Scheme PMVVY can be purchased offline as well as online through Life Insurance Corporation (LIC) of India which has been given the sole privilege to operate this scheme.

2) The scheme will provide an assured return of 8 per cent per annum payable monthly (equivalent to 8.30 per cent per annum) for 10 years.

3) The pension is payable at the end of each period, during the policy term of 10 years, as per the frequency of monthly/ quarterly/ half-yearly/ yearly as chosen by the pensioner at the time of purchase.

5) There is a minimum and maximum limit for investment in Pradhan Mantri Vaya Vandana Yojana Scheme. The amount varies according to the pension payment mode chosen. For example, under the yearly pension mode, the minimum amount that has to be invested in the scheme is Rs. 1,44,578 and the maximum at Rs. 7,22,892. In monthly mode, the minimum amount that has to be invested is Rs. 1,50,000 and maximum at Rs. 7,50,000.

Accordingly, Rs. 1,000 will be the minimum pension amount payable monthly for which Rs. 1,50,000 has to be invested. Similarly, the maximum monthly pension shall be Rs. 5,000 per month for which Rs. 7,50,000 has to be invested. For other modes, see the table above.

 Pradhan Mantri Vaya Vandana Yojana Scheme detial as mentioned on LIC website

6) On survival of the pensioner to the end of the policy term of 10 years, purchase price along with final pension installment shall be payable.

7) Loan up to 75 per cent of purchase price (amount invested to earn pension) shall be allowed after three policy years to meet the liquidity needs. Loan interest shall be recovered from the pension installments and the loan to be recovered from claim proceeds.

8) The scheme also allows for premature exit for the treatment of any critical/ terminal illness of self or spouse. On such premature exit, 98 per cent of the purchase price shall be refunded.

9) On death of the pensioner during the policy term of 10 years, the purchase price shall be paid to the beneficiary.