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Pradhan Mantri Vaya Vandana Yojana (PMVVY) – Benefits & Guide

Pradhan Mantri Vaya Vandana Yojana

Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a thoughtful insurance-cum-pension initiative that extends financial security to our esteemed senior citizens. Administered by the Life Insurance Corporation (LIC) and backed by the Indian government, this pension plan is a valuable avenue for post-retirement financial planning.

PMVVY operates on the promise of a guaranteed pension payout at a fixed rate for a decade, providing a secure avenue for retirees. With an attractive assured return of 7.4% per annum, payable monthly over the entire 10-year term, this scheme stands out for its reliability and commitment to the financial well-being of our senior citizens.

To comprehensively understand PMVVY and its benefits, read our detailed article on this invaluable pension scheme.

What Is Pradhan Mantri Vaya Vandana Yojana?

Pradhan Mantri Vaya Vandana Yojana is a government-backed insurance-cum-pension scheme designed to offer a reliable source of income to senior citizens in India during their post-retirement phase. Administered by the Life Insurance Corporation (LIC), this pension plan aims to address the financial needs of individuals aged 60 and above.

Originally introduced on May 4, 2017, the scheme was initially set to conclude on March 31, 2020. However, in a government press release dated May 20, 2020, it was announced that PMVVY would be extended for an additional three financial years, allowing eligible individuals to avail of its benefits until March 31, 2023.

Under PMVVY, participants are guaranteed a fixed pension payout at a specified rate for a duration of 10 years. The scheme offers an assured return of 7.4% per annum, disbursed on a monthly basis throughout the entire 10-year period.

This extension of the Pradhan Mantri Vaya Vandana Yojana reflects the government’s commitment to providing long-term financial security and stability for senior citizens, emphasising the significance of post-retirement financial planning.

Features of PMVVY

Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a robust avenue for ensuring retirement financial security through structured pension payments. This pension plan empowers individuals to receive a predetermined sum at the end of a user-selected period, extending up to a maximum term of 10 years.

Assured Returns

The scheme offers an initial guaranteed rate of return at 7.40% per annum for the year 2023-24, subject to annual resets thereafter. The reassessment aligns with the revised Senior Citizens Saving Scheme (SCSS) returns, capped at 7.75%. Any breach of this threshold prompts a fresh evaluation of the scheme.

Periodic Payout Options

PMVVY accommodates flexibility by allowing individuals to choose from monthly, quarterly, half-yearly, or annual payout intervals, tailoring the plan to their financial needs and convenience. The first payout, contingent on the chosen mode, is executed promptly post-plan purchase.

For instance, a pensioner opting for a quarterly payout receives the initial payment within 3 months from the policy acquisition date.

Maturity Benefit

Upon reaching the policy tenure’s conclusion, PMVVY grants a maturity benefit, entitling the pensioner to a lump sum purchase price along with the final installment payout.

Death Benefit

In the unfortunate event of a pensioner’s demise during the policy term, the designated beneficiary receives the entire purchase amount upon submission of requisite documents.

Surrender Value

Recognising the need for financial flexibility, the scheme permits policy surrender, providing policyholders with 98% of the purchase value upon premature exit from the policy term, and facilitating access to funds for critical illness treatments.

Free Lock-in Period

A distinctive feature of PMVVY is the provision for policy return within 30 days of receipt for online purchases and 15 days for offline purchases, allowing policyholders to reassess terms and conditions. The entire purchase amount, minus stamp duty or released pension payment, is refunded during this free lock-in period.

Loan Facility

After three successful policy years, individuals can avail themselves of a loan against their PMVVY investment, with a maximum limit of 75% of the purchase amount. Loan interest is deducted from pension payments based on the chosen repayment frequency, and outstanding amounts are reconciled during maturity or surrender.

Exclusion Clause

A unique exclusion exists in the policy concerning suicide, where the entire purchase price is payable in the unfortunate event of a policyholder’s suicide.

In sum, Pradhan Mantri Vaya Vandana Yojana is a comprehensive financial tool that guarantees returns and provides strategic options and safeguards for policyholders and their beneficiaries.

Eligibility for the PMVVY Scheme

The eligibility along with other details has been discussed in great detail in the table below:

Criteria Minimum Maximum
Entry Age (completed) 60 years No limit
Policy Term 10 years (fixed)
Mode of Purchase Price Payment One-time lump sum payment
Purchase Price Monthly: Rs.1,62,162

Quarterly: Rs.1,61,074

Half-yearly: Rs.1,59,574

Yearly: Rs. 63,960

Monthly: Rs.15,00,000

Quarterly: Rs.14,89,933

Half-yearly: Rs.14,76,064

Yearly: Rs.14,49,086

Mode of Pension Payment Monthly, quarterly, half-yearly, or yearly
Pension Amount Monthly: Rs. 1,000

Quarterly: Rs. 3,000

Half-yearly: Rs. 6,000

Yearly: Rs. 12,000

Monthly: Rs.9,250

Quarterly: Rs.27,750

Half-yearly: Rs.55,500

Yearly: Rs.1,11,000

When selecting the pension amount, individuals should take into account the family’s size, including a spouse and dependents such as unmarried daughters and unemployed sons, with a maximum age limit of up to 25 years.

Example of PMVVY

Let’s break down the workings of the Pradhan Mantri Vaya Vandana Yojana (PMVVY) using Rajan’s example:

Details of Rajan

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

Benefits of Pension with Assurance

Regular Pension Amount

  • The pension amount is calculated on the purchase price of Rs. 9 Lakh.
  • Fixed rate of 8% per year for the next 10 years.
  • The monthly payment mode is chosen by Rajan.
  • Calculation: (Rs. 9,00,000 * 8%) = Rs. 72,000/12 = Rs. 6,000.

Regardless of market conditions, Rajan will receive a Rs. 6,000 monthly pension for the next 10 years or until he survives within this tenure.

Maturity Benefit

After the completion of the 10-year policy term, Rajan will receive the full purchase amount of Rs. 9 Lakh.

Death Benefit

In the event of Rajan’s demise during the policy tenure (up to his 66th year), his spouse will receive the entire purchase amount of Rs. 9 Lakh as a beneficiary.

Surrender Value

  • In case of emergencies, Rajan can surrender the policy and receive 98% of the purchase price.
  • Example: Rs. 9 Lakh purchase price, surrender value equals Rs. 8,82,000 (98%).

Loan Facility

  • After successfully running the policy for over 3 years, Rajan can avail of a loan against his savings.
  • Loan amount is 75% of the purchase price, i.e., Rs. 6,75,000 in this case.
  • Example: Rajan applies for a loan in 2024 to renovate his house.

These benefits ensure financial security, flexibility, and support for unexpected financial needs during the policy tenure. The scheme provides a stable income stream, protection for dependents, and options for surrender or loan based on the policyholder’s needs.

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

You can apply for the PMVVY scheme both through online and offline methods. Here is how you can do that:

Offline Application

  • Visit the nearest or preferred branch of the Life Insurance Corporation of India (LIC).
  • Decide on the preferred purchase price or pension payment.
  • Fill up the application form available at the LIC branch.
  • Submit the application form along with the required documents and the chosen amount.
  • The LIC representative will assist in completing the application process.

Online Application

  • Visit the official website of the Life Insurance Corporation of India.
  • Under the ‘Buy Policy Online’ header, select “Pradhan Mantri Vaya Vandana Yojana.”
  • Click on the designated button no. 842 for the ‘Buy Online’ option.
  • Create an Access ID by providing contact details such as name, email ID, mobile number, date of birth, address, and servicing unit. Receive the 9-digit Access ID via SMS or email.
  • Submit the Access ID and click ‘Proceed’ to continue the application process.
  • Choose the preferred pension plan under Pradhan Mantri Vaya Vandana Yojana.
  • Fill up the online application form and upload scanned copies of the required documents.
  • Make the payment for the chosen purchase price or pension plan.
  • After successful submission, receive an acknowledgement and policy number.

By following these steps, individuals can apply for Pradhan Mantri Vaya Vandana Yojana either offline by visiting the LIC branch or online through the official LIC website, ensuring a convenient and hassle-free application process.

Documents Required to Apply for the PMVVY Scheme

To apply for the Pradhan Mantri Vaya Vandana Yojana (PMVVY), individuals are required to submit essential documents. These documents are crucial for the application process and ensuring the applicant’s eligibility. Here is a list of documents needed:

  • A duly filled and signed application form is required to initiate the process. This form can be obtained from the LIC office or downloaded from the official website.
  • A document serving as proof of the applicant’s age must be submitted. This can include a birth certificate, passport, or any other government-issued age verification document.
  • Valid government-issued photo identification such as an Aadhar card, passport, voter ID, or driver’s license should be provided.
  • Documents like Aadhar cards, passports, utility bills, or any other government-issued document with the applicant’s current address can serve as address proof.
  • Recent passport-sized photographs of the applicant need to be submitted along with the application form.
  • Proof of payment of the purchase price needs to be provided, especially for offline applications. This can be a copy of the payment receipt or any other document verifying the transaction.
  • In cases where the spouse is chosen as the beneficiary, age proof for the spouse may be required.
  • Details such as the date of receipt, date of risk commencement, date of policy revival (if any), and the date of adding riders (if any) need to be accurately mentioned in the application form.

Applicants should ensure that all documents are authentic, up-to-date, and submitted in accordance with the guidelines provided by the Life Insurance Corporation of India (LIC) to avoid any complications during the application process.

FAQs about PMVVY

As of 2023, senior citizens can invest a maximum of ₹15 lakhs in the PMVVY scheme. However, this limit is applicable until March 31, 2023, after which the scheme will be phased out.

The Pradhan Mantri Vaya Vandana Yojana scheme offers a guaranteed return of 7.4% per annum, payable monthly for a duration of 10 years. Individuals can invest up to ₹15 lakhs in this scheme, providing a reliable pension avenue.

A significant disadvantage of PMVVY is the deduction of a 2% amount on premature exit from the scheme, impacting the returns for senior citizens.

Eligibility for PMVVY requires individuals to be at least 60 years old, with no upper age limit for entry.

While Senior Citizen Savings Scheme offers an 8% per annum interest rate with quarterly payouts, PM Vaya Vandana Yojana provides a 7.4% per annum interest with monthly payouts. Additionally, the Senior Citizen Saving Scheme has a shorter tenure of five years compared to the ten-year term of PMVVY.

The current assured rate of return is 7.40% per annum for the year 2023-24. This fixed interest rate is set by the government to provide financial stability to senior citizens, irrespective of market fluctuations.

Investors can choose to invest in PMVVY either offline or through the online portal of the Life Insurance Corporation of India (LIC). For offline applications, a visit to the LIC branch is required.

In the unfortunate event of the pensioner's demise during the policy term, the scheme provides death benefits in the form of a refund of the entire purchase price to the beneficiary. Additionally, premature exit is allowed with a withdrawal of 98% of the deposit amount if the policyholder requires funds for critical disease treatment for themselves or their spouse.

No, investors cannot claim deductions under section 80C of the Income-tax Act by investing in PMVVY. Returns earned from the scheme will be taxed at the time of receipt according to the prevailing tax laws and the applicable tax rate.

Yes, individuals have the flexibility to invest in both PMVVY and Senior Citizens Savings Scheme (SCSS) simultaneously. A maximum investment of Rs. 15 Lakh in each scheme is allowed, totalling Rs. 30 Lakh for both. Both investment avenues are government-backed and offer substantial returns.

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