Pradhan Mantri Vaya Vandana Yojana (PMVVY)

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 of 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 annum, which will be payable monthly for the entire duration of 10 years.

Features and Benefits of PMVVY

Here are the Pradhan Mantri Vaya Vandana Yojana details-

  • Retirement Financial Security via Pension Payment

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.

  • Assurance of Returns

Pradhan Mantri Vaya Vandana Yojana Interest Rate - The scheme will initially provide an assured rate of return of 7.40 % per annum for the year 2023-24 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.

  • Periodic Payout Options

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.

  • Maturity Benefit

Pradhan Mantri Vaya Vandana 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.

  • Death Benefit

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.

  • Surrender Value

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.

  • Free Lock-in Period

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.

  • Loan Facility

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.

  • Exclusion

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.

Eligibility Criteria for the Pradhan Mantri Vaya Vandana Yojana

Individuals can purchase PMVVY 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.

Purchase Price Payment for Different Periodic Payouts under PMVVY

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
Half-yearly 1,59,574 6,000 Half-year
Quarterly 1,61,074 3,000 per Qtr.
Monthly 1,62,162 1,000 per month

Source: LIC official website

Understand the workings 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:

  • Age when bought: 62
  • Opted purchase price: Rs. 8 Lakh
  • Policy term: 10 years
  • Chosen pension payment mode: Monthly
  • Date of receipt: 1st February 2020
  • Beneficiary: Spouse
  • Annual income: Rs. 6 Lakh

Now, he is allowed to avail benefits of Pradhan Mantri Vaya Vandana Yojana under the following instances.

Benefits of Pension with Assurance

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.

  • Maturity Benefit

After a 10-year policy term completion, Rajan will receive Rs. 9 lakh that he paid while purchasing this plan.

  • Death Benefit

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.

  • Surrender Value

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%.

  • Loan Facility

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.

How to Apply for Pradhan Mantri Vaya Vandana Yojana Scheme (PMVVY)

Individuals can apply for Pradhan Mantri Vaya Vandana Yojana both offline and online from the Life Insurance Corporation of India.

  • Offline

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.

  • Online

For a hassle-free application process, individuals can apply for Pradhan Mantri Vaya Vandana Yojana online through the following steps.

  • Step 1: Visit the official website of the Life Insurance Corporation of India.
  • Step 2: Next, under the ‘Buy Policy Online’ header, click on the “Pradhan Mantri Vaya Vandana Yojana” option.
  • Step 3: A new tab will open with four different options. Now, click on the designated button no. 842 for the ‘Buy Online’ option. A new page will appear on the screen where you have to select the ‘Click to Buy Online’ option on the left side corner of the page.
  • Step 4: In the next step, create an Access ID to proceed further. Provide contact details such as name, email ID, mobile number, date of birth, address and servicing unit to generate the ID. You will receive this 9-digit Access ID either by SMS at the registered mobile number or through email.
  • Step 5: Next, submit the Access ID and hit the ‘Proceed’ button to go forward with the application.
  • Step 6: At last, after selecting the preferred pension plan under Pradhan Mantri Vaya Vandana Yojana, fill up the application form, upload scanned copies of the required documents and make payment. After successful submission of the application form, you will be provided with an acknowledgement and policy number.

Documents Required to Apply for Pradhan Mantri Vaya Vandana Yojana (PMVVY)

To apply for the pension scheme, individuals need to submit a handful of essential documents like –

  • Aadhaar Card
  • PAN Card
  • Details of the preferred bank where the pensioner wants the pension to be credited every month.

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.

Invest the way you want
Join millions of Indians who trust and love Groww
ⓒ 2016-2024 Groww. All rights reserved, Built with in India