GOI has launched the Pradhan Mantri Vaya Vandana Yojana (PMVVY) with an aim to provide regular and assured pension to senior citizens. Because of the advantage of assured pension, PMVVY scheme shields the senior citizens against a future fall in their interest income due to uncertain market conditions.
PMVVY launch and end dates
Pradhan Mantri Vaya Vandana Yojana was launched on 4th May, 2017 and initially meant to be available for one year from launch date i.e. 3rd May, 2018. In Budget, 2018 it is proposed to extend PMVVY scheme till March, 2020.
Eligibility for PMVVY
Pradhan Mantri Vaya Vandana Yojana is available to all citizens of India aged 60 years and above. So minimum age to enter this scheme is 60 years, there is no maximum age for entry though.
How to purchase PMVVY
LIC of India is managing this scheme so it can be purchased only through LIC. PMVVY scheme can be purchased both offline or online. If you wish to purchase the scheme online you can do it by log in LIC website – www.licindia.in.
PMVVY duration and pension options
PMVVY policy term is 10 years, so you will get pension for 10 years from the date of purchase.
Options for the frequency when the pension is paid are-
- monthly
- quarterly
- half yearly
- yearly
The pension payment shall be through NEFT or Aadhaar Enabled Payment System.
PMVVY purchase price and pension amount
As per the current structure minimum and maximum amount of pension you can get under PMVVY is Rs. 1000 and Rs. 5000.
The minimum and maximum purchase price under different modes of pension will be as under:
| Mode of Pension | Minimum Purchase Price | Maximum Purchase Price |
|---|---|---|
| Yearly | Rs. 1,44,578/- | Rs. 7,22,892/- |
| Half-yearly | Rs. 1,47,601/- | Rs. 7,38,007/- |
| Quarterly | Rs. 1,49,068/- | Rs. 7,45,342/- |
| Monthly | Rs. 1,50,000/- | Rs. 7,50,000/- |
So you can see the maximum amount you can invest is Rs. 7,50,000 as per current structure.
The purchase price has to be paid lump sum. The scheme is exempted from Goods and Services Tax (GST).
Note that Budget, 2018 proposed to increase the PMVVY investment limit from 7.5 Lakhs to 15 Lakhs, correspondingly maximum pension amount will also increase to Rs. 10,000 monthly.
Note that total amount of pension under all the policies allowed to a family under this plan shall not exceed the maximum pension limit. The family for this purpose will comprise of pensioner, his/her spouse and dependents.
Sample Pension rates
For calculation of pension you will get for the invested amount, you can use the following sample pension rates.
The pension rates for Rs.1000/- Purchase Price for different modes of pension payments are as below:
- 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.
So you can calculate that for getting Rs. 1,20,000 pension yearly (With new limit) you need to invest Rs. 14,45,783.
Interest rate
The biggest draw of the PMVVY is the assured return. Based on the above figures you can see that the return you get for monthly pension is 8% where as for yearly pension it is 8.3%. For quarterly it will come to 8.05% and half yearly pension interest rate is 8.13%.
Tax on PMVVY
There is no tax benefit available on the invested amount. On the contrary pension amount you get is taxable. The pension amount is added to your yearly income and taxed as per the applicable slab.
Only tax relief you get is that the scheme is exempted from Goods and Services Tax (GST).
Pradhan Mantri Vaya Vandana Yojna Benefits
- Pension payments – Pensioner will get the pension amount for the policy term of 10 years. The pension amount received and the frequency depends on the chosen amount (Rs. 1000 – Rs. 5000, will increase to Rs. 10,000 as per budget, 2018 announcement) and frequency (Monthly, quarterly, half-yearly, yearly).
- In case of death of the subscriber – In case of death of the policy holder during the policy term of 10 years, the purchase price shall be refunded to beneficiary.
- Maturity benefit - On survival of the subscriber to the end of the policy term of 10 years, purchase price along with final pension instalment shall be payable to the policy holder.
Pre-mature exit from PMVVY
You can pre-maturely exit from PMVVY during the policy term under exceptional circumstances like the pensioner requiring money for the treatment of any critical illness of self or spouse. The Surrender Value payable is 98% of purchase price in such cases.
Loan from PMVVY
You can apply for loan after completion of 3 policy years. The maximum loan that can be granted shall be 75% of the purchase price. The rate of interest to be charged for loan amount shall be determined at periodic intervals. For the loan sanctioned in Financial Year 2016-17, the applicable interest rate is 10% p.a. payable half-yearly for the entire term of the loan.
Should you opt for PMVVY
Based on the information provided you can make an informed decision whether it is a good scheme for you. To summarize let’s try to put the bad points and good points in black and white.
Good points-
- Assured pension, provides a regular, fixed source of income with no risk of fluctuations.
- Backed by Government of India.
- Provides an assured return of 8% to 8.3% depending on the frequency.
- Provides option for taking loan or surrendering the policy in exceptional circumstances.
- Provides an option to invest your retirement corpus for regular income. Proposal to increase investment limit to Rs. 15 lakhs brings the scheme at par with another investment scheme, Senior Citizen Saving Scheme (SCSS). So there are two options for senior citizens to get assured returns.
Bad points-
- Amount of pension is low, maximum is Rs. 5000 monthly (May increase to Rs. 10,000 as per the proposal in budget, 2018).
- Rate of return is fixed, if rates start moving upward in near future that will result in a loss.
- Income is taxable.
That's all for this topic Pradhan Mantri Vaya Vandana Yojana - PMVVY. If you have any doubt or any suggestions to make please drop a comment. Thanks!
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