PMVVY Pradhan Mantri Vaya Vandana Yojana – LIC Pension Plan

The government recently announced the Pradhan Mantri Vaya Vandana Yojana (PMVVY). It is a fixed 8% pension plan from LIC for senior citizens over the age of 60. In this article, we will discuss the various features of the plan, and also review it.

Eligibility

• The minimum age of the policyholder should be 60 years.
• There is no maximum age limit.

Purchase

• You can purchase this policy anytime between 4th May 2017 and 3rd May 2018.
• You can buy it offline as well as online from the LIC website.
• This is a single premium policy. So you can pay the entire purchase price in once.
• You can choose either the amount of pension or the purchase price. The minimum and maximum limits are given ahead.
• The Unique Identification Number (UIN) for this policy is 512G311V01.
• Since this the LIC plan no. 842, you have to submit the 842 Proposal Form to take this policy.

Policy Term

• The policy term is 10 years.
• The pension is paid on a monthly, quarterly, half-yearly, or yearly basis, depending on your choice.
• You will get the first installment of the pension after 1 month (or 3 or 6 or 12 months – depending on the mode of pension payment) after date of purchase of the policy.

Investment and Pension

The monthly pension will be 8%. For every Rs.1000 invested, the return according to the mode of pension picked will be:
Yearly: Rs. 83.00 p.a.
Half-yearly: Rs. 81.30 p.a.
Quarterly: Rs. 80.50 p.a.
Monthly: Rs. 80.00 p.a.

Note: These rates are independent of the age of the policyholder.

Minimum Pension and Purchase Price

Maximum Pension and Purchase Price

Note: The maximum pension amount is for the whole family. The whole family here refers to the pensioner, his/her spouse, and dependents. This means that the total pension received by policies held by different members of the family should not exceed the maximum pension limit.

PMVVY Mode for Pension Payment

The pension is paid on a monthly, quarterly, half-yearly, or yearly basis via NEFT or Aadhaar Enabled Payment System. 

PMVVY Maturity Benefit

Upon maturity, the purchase price, as well as the final pension installment, is paid to the policyholder.

PMVVY Death Benefit

If the pensioner dies during the policy period, the purchase price will be refunded to the beneficiary.

PMVVY Surrender/Premature Exit

• The premature exit is allowed only in cases of exceptional circumstances.
• It is allowed in case the pensioner needs funds for treatment of any critical illness for self or spouse.
• In such a case, the surrender value payable is 98% of the purchase price.

PMVVY Loan Facility

• You can avail a loan on the policy after completion of 3 years.
• The maximum loan amount is 75% of the purchase price of the policy.
• The government will periodically update the rate of interest on the loan.
• The interest rate for loans sanctioned in the financial year 2016-17 is 10% p.a.
• The interest is recovered from the pension amount payable. And the loan amount is deducted from the claim proceeds at the end of the policy term.

PMVVY Tax

• This policy doesn’t offer any tax benefits.
• Both the purchase price and interest are taxable.

Review of the Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Pros:

• It offers a fixed 8% rate of interest. This is higher than that given by Fixed Deposits in banks.
• Since the interest rate will not fluctuate, it gives guaranteed income.
• The interest is age independent.
• It is a safe and straightforward scheme that is backed by the Government. So it doesn’t have any risk factor.

Cons:

• The maximum monthly pension per family is Rs.5000. This may not be sufficient for a lot of people.
• No tax benefits is a major drawback.
• This scheme offers very little liquidity, and that too in exceptional cases.
• The fixed interest rate doesn’t take into account inflation.

Hence it is important to carefully evaluate the pros and cons, and opt for this scheme only if it meets your requirements. You can also opt for it as just one part of your retirement portfolio.