Pradhan Mantri Vaya Vandana Yojana is an insurance policy-cum- pension scheme that provides alternative avenues of income to senior citizens of the country. Backed by the Indian government, this pension plan is provided by Life Insurance Corporation (LIC) which caters to one’s need for post-retirement financial planning.
Individuals, more than 60 years of age can avail this scheme. PMVVY, which was earlier available from 4th May 2017 to 31st March 2020, was recently (Govt. Press Release dated May 20, 2020) extended by the government for another three financial years till 31st March 2023.
PMVVY gives a guaranteed pension payout at a specified rate for 10 years. This scheme will provide an assured return of 7.4 per cent per annum which will be payable monthly for the entire duration of 10 years.
Under Pradhan Mantri Vaya Vandana Yojana, individuals who have availed of this pension plan are allowed to receive a fixed amount at the end of a certain period chosen by an individual for a maximum term of 10 years.
PM Vaya Vandana Yojana will initially provide an assured rate of return of 7.40 % per annum for the year 2022-23 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 the 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.
Individuals can opt for monthly, quarterly, half-yearly or annual payout with the plan as per their financial requirements and convenience. The first payment must be performed immediately after plan purchase, depending on one’s chosen payment mode. For example, if a pensioner has chosen a quarterly mode of payment, he/she should receive the first payment within 3 months from the date of policy purchase.
Pradhan Mantri Vy Vandna Yojna also comes with the maturity benefit of receiving a lump sum purchase price of the plan along with the last instalment payout. This facility is valid for the survival of a pensioner until this policy tenure’s end.
In the event of a pensioner’s death during the policy term, his/her beneficiary is entitled to receive an entire purchase amount as a claim on submitting required documents.
Considering the monetary requirement to avail of the treatment of critical illnesses for self or spouse, this scheme also allows a pensioner to surrender the policy. Policyholders can receive 98% of the purchase value during premature exit from the policy term.
After purchasing a policy, if individuals are not comfortable with the terms and conditions mentioned in the contract, they are allowed to return this scheme within 30 days from the date of receipt in case of online purchase. Yet, the free lock-in period for offline purchases is 15 days starting from the policy purchase date. A reason for objection must also be enclosed while returning this policy.
The entire purchasing amount after a deduction of any applicable stamp duty or released pension payment needs to be refunded within its free lock-in period.
After completing 3 successful policy years, individuals can avail loan against a Pradhan Mantri Vaya Vandana Yojana investment. Pensioners can borrow a maximum of 75% of the purchase amount as a loan. Interest calculated on the loan is recovered from the pension payment as per the chosen frequency of loan repayment. The interest payable gets due on the pension payment date.
Furthermore, during maturity or surrender, the loan outstanding will be recovered from its claim amount.
The pension-cum-insurance scheme also comes with a unique exclusion to this policy’s purchase price return. Under this exclusion, the entire purchase price is payable if a policyholder commits suicide.
Individuals can purchase Pradhan Mantri Vaya Vandana Yojana only after meeting the eligibility criteria determined by the government. Here is a list of criteria one needs to fulfil elucidated in a tabular format.
|Minimum Entry Age||Maximum Entry Age||Policy Term||Minimum Pension||Maximum Pension|
|60||No limit||10 years||Rs.1,000 per month||Rs.10,000 per month|
|Rs.3,000 per quarter||Rs.30,000 per quarter|
|Rs.6,000 per half-year||Rs.60,000 per half-year|
|Rs.12,000 per year||Rs.1,20,000 per year|
When choosing a pension amount, individuals must consider the family’s size. Here, one’s family includes a spouse and dependents such as an unmarried daughter and an unemployed son with a maximum age limit of up to 25 years of age.
Interested individuals can purchase the PMVVY scheme in monthly, quarterly, half-yearly or yearly payout mode by depositing the purchase price in a lump sum. A buyer can either select the purchase price or pension amount while opting for this plan.
Check out the maximum and minimum purchase prices to better understand this scheme.
Maximum purchase price under different modes of pension
|Mode of pension||Maximum purchase price||
Corresponding pension amount
|Yearly||14,49,086||1,11,000 per annum|
|Half-yearly||14,76,064||55,500 per half-year|
|Quarterly||14,89,933||27,750 per Qtr.|
|Monthly||15,00,000||9,250 per month|
Minimum purchase price under different modes of pension
|Mode of pension||Minimum purchase price||
Corresponding pension amount
|Yearly||1,56,658||12,000 per annum|
|Quarterly||1,61,074||3,000 per Qtr.|
|Monthly||1,62,162||1,000 per month|
Source: LIC official website
Understand the working of this entire scheme with an example. For instance, Rajan has purchased this plan by investing a lump sum amount to secure a fixed income for the immediately following 10 years after his retirement/scheme purchase.
Details of Rajan:
Now, he is allowed to avail benefits of Pradhan Mantri Vaya Vandana Yojana under the following instances.
The pension amount will be calculated on the purchase price, which is Rs. 9 Lakh, at a fixed rate of 8% per year up to the next 10 years. Furthermore, as Rajan has chosen a monthly payment mode, the entire yearly interest income will be divided by 12 and paid every month.
Therefore, the pension amount arrived at is as follows.
(Rs.9,00,000 X 8%) = Rs.72,000/12 = Rs.6,000
Thus, regardless of the market condition, Rajan receives Rs.6,000 as a pension every month under this scheme up to the next 10 years or till he survives within this 10-year tenure.
After a 10-year policy term completion, Rajan will receive Rs. 9 lakh that he paid while purchasing this plan.
Unforeseen events like death can leave the dependents financially unstable. However, if the deceased is insured, then his/her dependent can remain financially covered.
For instance, Rajan receives a pension amount of Rs. 6,000 till 66 years of his age. However, in the case of his unfortunate demise in his 66th year, his spouse will receive an entire purchase amount of Rs. 9 Lakh as a beneficiary. This benefit is valid only if his death occurs during the policy tenure.
If Rajan requires funds in a lump sum anytime during the policy term, during an emergency like an urgent medical treatment either for himself or his spouse, as per this scheme’s rules, he will receive 98% of his purchase price as a surrender value. In this case, where the purchase price stands at Rs. 9 Lakh, the surrender value will equate to Rs. 8,82,000, i.e., 98%.
As another example, Rajan needs funds to renovate his house in the year 2024. So, he applies for a loan against his savings under Pradhan Mantri Vaya Vandana Yojana. As this policy has been successfully running for more than 3 years, he can avail 75% of Rs. 9 Lakh, i.e., this scheme’s purchase price amounting to Rs. 6,75,000 as a loan.
Individuals can buy Pradhan Mantri Vaya Vandana Yojana both offline and online from the Life Insurance Corporation of India.
To purchase this scheme through the offline mode, individuals need to approach the nearest or preferred branch of LIC. After deciding on the preferred purchase price or pension payment, individuals need to fill up the application form and submit it along with the required documents and the chosen amount.
For a hassle-free application process, individuals can apply for Pradhan Mantri Vaya Vandana Yojana online through the following steps.
To apply for the pension scheme, individuals need to submit a handful of essential documents like –
Individuals purchasing the pension scheme need to be careful about the date of receipt, date of risk commencement, date when the policy was revived if any and the date of adding riders if any.