NEW DELHI: The government will formally launch on Friday a pension scheme for senior citizens that promises an assured return of 8%. Finance, defence and corporate affairs minister Arun Jaitley will launch the Pradhan Mantri Vaya Vandana Yojana (PMVVY), which was announced in the 2017-18 Union Budget.
The scheme is open to people aged 60 years and above. It can be purchased offline as well as online through the state-run Life Insurance Corporation (LIC) of India, which has been given the mandate to operate the scheme.
Part of the government’s overall plan to provide pension benefits to the section of the population that lacks social security benefits, the scheme can be purchased by making a one-time payment.
The plan provides an annual assured return of 8% payable monthly (equivalent to an annual effective rate of 8.30%) for 10 years.
The scheme has been available from May 4 and closes on May 3 next year.
During the policy term of 10 years, the pension will be payable at the end of each period, depending on the frequency — monthly, quarterly, half-yearly, or yearly — chosen by the pensioner at the time of the purchase. The scheme is exempt from the Goods & Services Tax (GST), a finance ministry statement said.
If the pensioner lives to the end of the policy term of 10 years, the purchase price, along with the final pension instalment, will be paid. One can avail of a loan up to 75% of the purchase price after 3 years of the policy. Interest on the loan will be recovered from the pension instalments, and the loan from the claim proceeds.
The scheme allows for premature exit for the treatment of any critical, terminal illness of the pensioner or spouse. On such premature exit, 98% of the purchase price will be refunded. On death of the pensioner during the policy term, the purchase price shall be paid to the beneficiary. The ceiling for maximum pension is for a family as a whole, with the family comprising the pensioner, his or her spouse, and dependants.
The shortfall owing to the difference between the interest guaranteed and the actual interest earned and the expenses relating to administration shall be subsidised by the Centre and reimbursed to LIC, the statement added.