What is Pradhan Mantri Vaya Vandana Yojana (PMVVY)?

Latest edit: May 26, 2020:

LIC launches ‘Pradhan Mantri Vaya Vandana Yojana (Modified- 2020) Scheme  (for detail read PMVVY modified 2020) with an assured rate of return of 7.40% per annum. The new scheme opens from May 26, 2020, up till March 31, 2023,

The ‘Pradhan Mantri Vaya Vandana Yojana ’ has been launched by the Government of India on May 4, 2017.  LIC of India has been mandated to operate the scheme.   The policy under the scheme was initially open for a short period of one year and was then extended to 31 March 2020. Senior citizens of 60 years and above are eligible to invest in the scheme. Investment in the scheme can be made either through LIC online or off-line.

Highlights of the scheme:

  1. The scheme offers an assured return (Pension) of 8% payable monthly for 10 years (equivalent to 8.30 percent per annum).
  2. There are a minimum and maximum limit for investment. The investment can be made by making a one-time purchase or in parts. The ceiling of minimum or maximum amount varies according to the pension payment mode chosen as per the below table.
Mode of Pension For Monthly Pension scheme For Quarterly Pension scheme For Half-yearly Pension  scheme For Yearly Pension scheme
Minimum Purchase Rs.150000 Rs.149068 Rs.147601 Rs.144578
Maximum Purchase Rs.750000* Rs.745342 Rs.738007 Rs.722892
Minimum Pension Rs.1000 Rs.3000 Rs.6000 Rs.30000
Maximum Pension Rs.5000* Rs.15000 Rs.12000 Rs.60000

* In pursuance to Budget Announcement 2018-19, the Pradhan Mantri Vaya Vandana Yojana has been extended up to 31st March 2020. The limit of the maximum purchase price of Rs. 7.5 lakh per family under the scheme has also been enhanced to Rs 15 lakh per senior citizen. Accordingly, the maximum pension admissible under the scheme is now Rs.10,000/- per month.

  1. On completion of the policy term of 10 years, the pensioner (investor) will be refunded the purchase price (amount invested to earn pension) along with the final installment. In case of the death of the pensioner during the policy term of 10 years, the purchase price will be paid to the nominee.
  2. Loan up to 75 percent of the purchase price can be availed after 3 years of the date of policy purchased. Interest will be recovered from pension installment and the loan amount will be recovered from purchase price payable to pensioner at the end of 10 years term or from the settlement of death claim as the case may be.
  3. In case of emergencies like treatment of any critical/ terminal illness of self or spouse, pre-mature closure of the investment is allowed. However, 2% of penal charges will be levied on premature withdrawal and 98 percent of the purchase price will be returned.
  4. The interest earned from the above scheme is taxable as per income tax slabs.
  5. The scheme is exempted from goods and services tax (GST).
  6. On the death of the Pensioner during the policy term of 10 years, the Purchase Price shall be refunded to the beneficiary.
  7. Suicide: There shall be no exclusion on a count of suicide and full Purchase Price shall be payable
  8. If a policyholder is not satisfied with the “Terms and Conditions” of the policy, he/she may return the policy to the Corporation within 15 days (30 days if this policy is purchased online) from the date of receipt of the policy stating the reason of objections. The amount to be refunded within the free look period shall be the Purchase Price deposited by the policyholder after deducting the charges for Stamp duty and pension paid if any.

The PMVVY scheme is expected to provide a steady regular source of income to a large section of the senior citizen population at a time of falling interest rates.

Surendra Naik

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Surendra Naik

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