LIC’s Pradhan Mantri Vaya Vandana Yojana(PMVY)
Life Insurance Corporation, popularly known as LIC is an Indian public sector life insurance company with strong brand equity and market presence. LIC offers huge range of life insurance products to cater to diverse range of individual’s insurance needs. Various government launched schemes are offered through LIC. Pradhan Mantri Vaya Vandana Yojana is one such pension scheme introduced by Indian government for the benefit of senior citizens.
What are pension plans?
Pension plans, which are also known as retirement plans that lets you invest part of your savings over a certain period of time and helps you avail steady income post your retirement. There are various types of pension plans offered by LIC. Pradhan Mantri Vaya Vandana Yojana is exclusively designed for senior citizens.
Pradhan Mantri Vaya Vandana Yojana Plan
Pradhan Mantri Vaya Vandana Yojana is a pension scheme introduced by the government of India exclusively for senior citizens aged 60 years and above. The scheme offers 8% guaranteed interest for 10 years. The scheme is also exempted from the GST, i.e. the goods and services tax. Life Insurance Corporation has been given sole right to operate the scheme. LIC has started offering Pradhan mantri Vaya Vandana Yojana from its launch date 4th May, 2017. The scheme will remain available for investment till 31st March, 2020. Let’s take a look at the features of Pradhan Mantri Vaya Vandana Yojana.
Features of Pradhan Mantri Vaya Vandana Yojana
- Pradhan Mantri Vaya Vandana Yojana can be purchased by making a lump sum investment ranging from INR. 1,50,000/- to INR. 15,00,000/- for a monthly pension. (Earlier the maximum limit for investment was INR. 7,50,000/- per family). However, the maximum investment limit now is specific to per senior person. That means, every senior citizen individual in a particular family can invest up to 15 lakhs.
- The scheme provides assured rate of return of 8% p.a payable monthly for the period of 10 years. This equals to 8.3% p.a effectively.
- The scheme is exempted from goods and services tax or GST
- There is no restriction on the maximum age of entry for the investment
- The scheme is available for purchase both in offline and online mode with LIC.
- You can choose the mode for the payment of pension as per your choice – annual, semi-annual, quarterly or even monthly. Payment of pension will be made through an NEFT payment or even AEPS i.e. Aadhaar Enabled Payment System.
The first instalment of pension would be paid at the end of the year, six months, and three months or at the end of the month depending on the frequency of payment chosen by you i.e. yearly, half-yearly, quarterly or monthly respectively.
(Note: Pradhan Mantri Vaya Vandana Yojana got revamped post the changes proposed in Union Budget 2018. Changes were with respect to limit of investment and the scheme extension.)
Who should buy Pradhan Mantri Vaya Vandana Yojana?
In the current falling interest scenario, Pradhan Mantri Vaya Vandana Yojana looks attractive for many retired senior citizens with small retirement corpus and limited means. Pradhan Mantri Vaya Vandana Yojana is suitable for you, if –
- You are a senior citizen seeking some steady regular source of income to secure your retirement life.
- You are looking for long term investment as the policy term is 10 years
- You are looking for an investment that can fulfil your liquidity needs apart from regular income.
Eligibility criteria for Pradhan Mantri Vaya Vandana Yojana
Let’s take look at the eligibility requirements for buying Pradhan Mantri Vaya Vandana Yojana
|Entry age in years
|Policy term in years
Eligibility requirement for the amount of investment and pension pay-out differs depending on the mode of pension payment chosen by you. Here is the eligibility requirement :
|Mode of pension payment
|Minimum purchase price (in INR.)
|Minimum pension (in INR.)
|Maximum purchase price (in INR.)
|Maximum pension (in INR.)
(Note: Upper cap on the maximum purchase price is per senior citizen.)
Benefits of Pradhan Mantri Vaya Vandana Yojana Plan
Here are some of the benefits offered by this government’s flagship scheme.
- Steady Regular Income
If the pensioner survives, the plan provides a steady income regularly in the form of pension payment as per the mode chosen by the pensioner till the end of the policy term of 10 years.
For example, you have invested INR. 12 lakhs in Pradhan Mantri Vaya Vandana Yojana for a monthly pension payment facility. Then, you would receive INR. 8000 [(1200000*80/1000)/12] as pension at the end of every month till the end of policy tenure i.e. a tenure of 10 years.
- Guaranteed Return
The scheme offers pension at an assured rate of interest per annum for the entire policy period of 10 years. Pension rates would vary depending on the mode of pension payment chosen. These pension rates are age independent.
Let’s take a look at sample pension rates for each mode of pension payment
Sample pension rate per INR. 1000 of amount invested or purchase price
|Annual rate per INR. 1000
- Loan facility
Once the policy completes three years of term, the facility of loan is made available. Maximum of up to 75% of the price of purchase or the invested amount can be granted as loan. Loans sanctioned till 30th April, 2018 are charged at an interest rate of 10% p.a. payable on half-yearly basis for the entire loan term. The Interest rate applicable for the loan amount shall be determined at periodic intervals.
Interest on loan amount is recovered from the pension payable under the policy. However, the principal outstanding of the loan would be recovered from the end claim proceeds.
For example, you have invested INR. 10,00,000/- in Pradhan Mantri Vaya Vandana Yojana at the age of 60. Then, after three year of policy purchase, you can avail a loan up to Rs. 7,50,000 (75% of 10,00,000).
- Flexibility to choose the pension payment frequency
Pradhan Mantri Vaya Vandana Yojana offers flexible pension payment options such as monthly, quarterly, half-yearly and yearly.
- Tax benefits
The investment made into Pradhan Mantri Vaya Vandana Yojana is exempt from the income tax as U/S 80CCC of the Income Tax Act, 1961. The pension received on the investment is an annuity, which is taxable in the hands of the annuitant.
Documents required to buy Pradhan Mantri Vaya Vandana Yojana Plan
There are few documents to be furnished while buying Pradhan Mantri Vaya Vandana Yojana. Here is the list of documents required.
- Age proof such as PAN card, Passport, Aadhaar card, Driving license or Voter’s ID card etc.
- Aadhaar card
- Address proof such as Driving license, Passport, Voter’s ID card, Telephone bill or Utility bill etc.
- Passport size photograph
- Documents related to the retirement
Scope of coverage under Pradhan Mantri Vaya Vandana Yojana
The scheme offers benefits in both of the below scenarios.
- Scenario 1: In case pensioner dies during the policy period of 10 years, then the policy offers death benefits to the beneficiary/nominee.
Original purchase price or the actual amount invested by the pensioner is paid back to beneficiary/nominee as death benefit.
For example, Mr. Sharma aged 60 years has invested INR. 15,00,000 in Pradhan Mantri Vaya Vandana Yojana, for which he is receiving monthly pension of INR. 10,000 (8% of 15 lakhs/ 12 months). Let’s say, he dies when he is 66 years old. In that case, the monthly pension pay-out would be discontinued from the date of death and the amount invested by him i.e. INR.15 lakhs would be paid out his nominee.
- Scenario 2: In case pensioner survives till the end of policy period of 10 years, then the policy offers survival benefits to the pensioner.
On completing the policy period of 10 years, original purchase price or the actual amount invested by the pensioner is paid back to him/her as survival benefit.
For example, if we take Mr. Sharma’s case, at the end of policy term i.e. when he is at the age of 70 years, he would receive back his original investment of INR. 15 lakhs as survival benefit. Till the end of the policy term, he would continue to receive his monthly annuity of INR. 10000 at the end of every month.
Exclusions under Pradhan Mantri Vaya Vandana Yojana
Suicide: There shall be no exclusion on count of suicide and full purchase price (invested amount) shall be payable.
How to buy Pradhan Mantri Vaya Vandana Yojana?
Pradhan Mantri Vaya Vandana Yojana can only be bought from LIC either offine or online through LIC website. Here is how you can purchase the scheme through either of the two modes.
- Offline mode
Pradhan Mantri Vaya Vandana Yojana application form with UIN 512G311V01 is available at LIC branch offices. Application copy can also be downloaded from LIC website. All the details needs to be filled up and then submit the duly signed application form at LIC branch office along with all the required documents.
- Online mode
Pradhan Mantri Vaya Vandana Yojana scheme can be bought online through LIC website. Here is a simple procedure to follow :
- Click on LIC’s Pradhan Mantri Vaya Vandana Yojana on the above link.
- Click on ‘‘buy online’’ tab, this will take you to application page
- Fill in all the relevant details in the application form and then click on ‘‘Get Access ID’’
- Nine digit access id will be sent on your contact number provided via SMS or through email
- Enter the access ID and click on “proceed”
- Complete the application, you will receive an acknowledgement number on completion followed by policy number at the end.
How to claim benefits under Pradhan Mantri Vaya Vandana Yojana Plan?
In case the pensioner dies during the policy term, death claim should be initiated by the nominee. Once the claim application with relevant documents are submitted, the request will be processed.
Here are the documents required to be submitted in death claims
- Death certificate
- Policy document
- Identity proof of nominee/beneficiary
In case of accidental or unnatural death, some of the additional documents may not be furnished
- Police FIR
- Post-mortem report
- Hospital records
- Medical certificates
However, at the end of the policy term maturity claims would be initiated by LIC only.
Yes, you can cancel your investment in Pradhan Mantri Vaya Vandana Yojana within the ‘free-look period’ stated in the policy. The scheme comes with free-look period of 15 days (for offline policies) or 30 days (for online policies). Hence, if you are not satisfied with the ‘’terms and conditions’’ of the policy, you can cancel your investment within 15 days (30 days for online policy) from the date of receipt of the policy. However, you need to state the reason for cancellation of the policy. When you cancel, the total purchase price will be refunded back to you after deducting stamp duty charges and pension paid, if any.
Yes, you can! Pradhan Mantri Vaya Vandana Yojana allows you to take premature exit during the policy term of 10 years in an exceptional situations like needing the money for critical illness treatment or for the terminal illness care for self or spouse. The company would pay-out 98% of the purchase price on surrendering the policy mid-way.
1. You have invested INR. 12,00,000 at the age of 60 years in LIC’s Pradhan Mantri Vaya Vandana Yojana.
2. You would be receiving monthly pension of INR. 8,000.
Let’s say at the age of 67, you needed money for urgent treatment of some critical illness. On making premature exit under the scheme, you would be able to get :
– INR 11,76,000 (98% of INR 12,00,000).
No. Pradhan Mantri Vaya Vandana Yojana is not an annuity plan. The scheme comes with limited term pension offer. Hence, you would be receiving the regular steady pension income only during the policy period. Once the policy term of 10 years is completed, reinvesting offer can be considered only if the plan is available at that time. Interest rate on offer may also vary. Currently, Pradhan Mantri Vaya Vandana Yojana is available for investment only up till 31st March, 2020.
Earlier when the scheme was launched investment limit was capped at INR. 7,50,000 for a family. However, new changes are made in the year by increasing the investment limit to INR. 15,00,000. And also, limit applicable to the family as a whole is changed to per senior citizen.
Let’s say, you and your spouse both are senior citizen, then Pradhan Mantri Vaya Vandana scheme allows each of you to make INR. 15,00,000 investment in to the scheme. That means you and your spouse together can invest up to INR. 30,00,000.