Pradhan Mantri Vaya Vandana Yojana

Pradhan Mantri Vaya Vandana Yojana - An Overview

Pradhan Mantri Vaya Vandana Yojana (Modified-2020), popularly known as PMVVY in short, is a government-guaranteed scheme where the Government of India through the Pension Fund Regulatory and Development Authority (PFRDA) is backing it. PMVYY Plan no. 856 offers monthly income support to retired senior citizens in the form of assured pension. This is actually a non-linked life pension plan of LIC which will not participate in the capital market and is purely a fixed annuity plan.
This pension scheme was introduced for senior citizens after the success of a similar scheme called the LIC Varishtha Pension Bima Yojana. Only LIC has the authority to operate this scheme and its sales. However, this scheme was only available for purchase till 31st March, 2023.

Key Features of the Pradhan Mantri Vaya Vandana Yojana for Senior Citizens

• Only people aged 60 years or above are eligible to invest in this scheme.

• The latest LIC Pradhan Mantri Vaya Vandana Yojana interest rate for 2022 is 7.40% per annum. The pension rate remained the same in 2020-21 and 2021-22 as well.

• There is a cap on the minimum and maximum pension amount and purchase price as per the mode of payment chosen by the pensioner (see Eligibility Conditions).

• The purchase price has to be paid in a lump sum.

• LIC offers a refund of the purchase price if the pensioner finds the scheme unsatisfactory and returns it within the free look period.

Benefits Offered Under LIC Pradhan Mantri Vaya Vandana Yojana Policy

It comes packed with the following benefits for senior citizens:

1. A regular pension for 10 years

   The assured pension amount shall be paid out regularly as per the interval chosen by the pensioner. If you want a monthly pension, LIC will pay out a fixed pension amount at the defined rate every month for 10 years (unless you die during this period).

2. Death benefits for family & dependents

   If you die within the policy term of 10 years, LIC will return the purchase price paid by you to the assigned nominee.

3. Maturity benefits from surviving 10 years

   If the insured individual survives to the very end of the policy tenure of 10 years, the purchase price, including the final pension installment, will be paid by LIC.

4. Surrender benefits on premature exit

   This benefit can be availed under exceptional events like the assured life requiring money for the treatments of any critical/terminal illness of self or spouse. In such cases, LIC will pay you an S.V (Surrender Value), which is around 98% of the original Purchase Price.

5. Loans can be availed in financial emergencies

   If you find yourself in urgent need of capital during the policy tenure, you can request LIC for a loan against the policy benefits. The loan facility can be availed after the completion of 3 policy years and is subject to a maximum loan of 75% of the Purchase Price.

   The Pradhan Mantri Vaya Vandana Yojana interest rate 2021 on loans availed till 30th April 2021 is 9.5% p.a.

6. Increased savings through income tax benefits

   One can avail of the income tax benefits on premiums under Section 80C and on the death & maturity benefits under Section 10(10D) of the Income Tax Act of 1969.

   * Tax benefits are subjected to certain changes in the tax laws

Eligibility Conditions

Certain parameters have to be met to enjoy the benefits of this pension plan for senior citizens.

How does the LIC Pradhan Mantri Vaya Vandana Yojana Work?

Let’s assume that you are a 60-year-old male at the time of purchasing the policy. You pay a purchase price of Rs.10 lakhs in the scheme. You want to secure a monthly pension for 10 years. The annual pension rate of 7.40% p.a will be divided into 12 payments for every month in a year.

Here are the benefits you will be entitled to under the following circumstances -

1. Monthly pension from the age of 60 to 70

   Your monthly pension will amount to Rs (10,00,000 x 7.40%)/12 = Rs.6,167 payable across 10 years.

2. If you die in the 6th policy year

   • You will be entitled to a monthly pension of Rs.6,167 for the first 5 policy years.

   • Your family will get the Rs.10 lakhs that you had invested in the scheme.

3. If you survive 10 policy years

   • A monthly pension worth Rs.6,167 will be credited to your account throughout the tenure of 10 years.

   • The purchase price of Rs.10 lakhs will be returned to you after completing 10 years.

   You can use the Pradhan Mantri Vaya Vandana Yojana Calculator to calculate the pension amount against the purchase price.

Policy Details of PM Vaya Vandana Yojana

• Loan option
  A loan facility is available upon the customer completing a three-year period from the date the policy was bought. A loan of up to 75% of the purchase price is the maximum loan amount that can be availed.

• Surrender Benefit
  The policyholder can surrender the policy before maturity due to very rare circumstances like the policy holder or his/ her spouse suffering from an illness which is very serious, and the case is hopeless.

• Free-look Period
  The policy has a no-questions-asked period of 15 days from the date the policy holder starts the policy. This period gets doubled i. e. 30 days, if the policy is bought through an online way or post delivery.

• Taxes
  wherever taxes are leviable, they are collected separately following the tax laws governing at the respective time periods. GST paid on the purchase price is not to be regarded as part of the benefits payable under the policy.

Exclusions of Pradhan Mantri Vaya Vandana Yojana Plan

It covers all deaths irrespective of whether it is natural or resulting from suicide, accidents, etc. The purchase price shall be returned in full if it occurs within the policy term.

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