Most senior citizens rely on fixed deposits (FDs) for regular income. However, due to the outbreak of COVID-19, banks across the world have slashed interest rates and therefore interests on FDs have also gone down. If elderly people are looking for lucrative investment options that offer higher returns even at times of falling rates then they should put their money in Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme.
The Life Insurance Corporation of India (LIC) has modified the interest rates of pension under the plan and the period of sale has also been extended and will be available for sale for three financial years till March 31, 2023.
The pension scheme for the first financial year, up to March 31, 2021 will provide an assured rate of return of 7.40 percent per annum. The PMVVY scheme can be purchased offline as well as online from LIC website at licindia.in.
As per the notification, LIC is solely authorised to operate the scheme that offers a total purchase price not exceeding Rs 15 lakh.
Eligibility conditions of PMVVY scheme
The minimum entry age in 60 years (completed). There is no maximum entry age. The policy term is for 10-year. For policies sold in the first financial ending March 2021, the scheme will provide a fixed rate of return of 7.40 per cent per annum. The interest will be paid monthly for the entire tenure. Senior citizens can draw a minimum pension of Rs 1,000 per month depending on the amount invested. The maximum pension amount is limited at Rs 9,250 per month.
The minimum investment has also been revised to Rs 1,56,658 yearly for pension of 12,000 and Rs 1,62,162 for getting a minimum pension amount of Rs 1,000 per month.
The minimum purchase price for quarterly pension is Rs 1,61,074, for half-yearly it is Rs 1,59,574. The maximum pension that a senior citizen can get under the scheme is Rs 9,250 per month, for per quarter it is 27,750, for half-yearly it is Rs 55,500 and for a year it is Rs 1,11,000.
As per the LIC, the scheme can be purchased by payment of a lump sum purchase price. The pensioner will get the option to choose either the amount of pension or the purchase price. At the time of purchasing the scheme, he/she can choose monthly/quarterly/half yearly or yearly mode of pension.
Benefits of PMVVY scheme
LIC said that on survival of the pensioner during the policy term, pension in arrears (at the end of each period as per mode chosen) shall be payable.
On the death of the pensioner during the policy-term, the purchase price shall be refunded to beneficiary. On survival of the pensioner to the end of the policy term of 10 years, purchase price along with final pension installment will be paid to the scheme holder.
The scheme allows premature exit during the policy term under exceptional circumstances, including the pensioner requiring money for the treatment of any critical/ terminal illness of self or spouse. The Surrender Value payable in such case shall be 98 per cent of the purchase price.
The scheme also allows loan up to 75 per cent of purchase price after three policy years.