Recently, the Union Cabinet decided to extend the Pradhan Mantri Vaya Vandana Yojana (PMVVY) for a period of three years. Now, this social security scheme tailored for senior citizens will continue until March 2023. Until recently, the scheme remained available until 31st March 2020. This scheme guarantees an assured rate of return of 7.40% per annum for 2020-21 and adjusted yearly thereafter in line with the Senior Citizen Savings Scheme (SCSS). The Finance Minister approves this annual reset rate of return at the start of each financial year.
About the Pradhan Mantri Vaya Vandana Yojana
The PMVVY was launched back in 2017 by India’s Ministry of Finance. Its primary objective is to guarantee a monthly pension payout for senior citizens. This scheme can be purchased both offline and online through Life Insurance Corporation (LIC), which has exclusive rights to operate it.
Eligibility Criteria and Components of PMVVY
To be eligible for this scheme, an individual must have completed 60 years of age. There is no upper age limit for participation. Under PMVVY, one can invest a maximum amount of Rs.15 lakh. The policy tenure is determined to be ten years. Depending on the amount invested in the scheme, senior citizens can receive a minimum pension of Rs.1,000 per month and up to a maximum of Rs.10,000 per month. Pension payment frequency can be chosen by the pensioner at the time of purchase – monthly, quarterly, half-yearly, or yearly. Aadhar card is mandatory to benefit from this scheme.
Government’s Role in PMVVY
The government’s financial liability is capped to the difference between the generated market return by LIC and the assured rate of return (7.4% for 2020-21). The pension is based on this assured return rate, which provides elderly persons, aged 60 years and above, a protective layer against potential declines in their interest income due to unpredictable market conditions.
Additional Benefits of PMVVY
Beyond the guaranteed pensions, this scheme offers a loan facility, where up to 75% of the Purchase Price can be availed after three policy years. Furthermore, PMVVY comes with an added advantage of being exempted from Goods and Services Tax (GST).
