The LIC Senior Citizen Scheme, on behalf of the Government of India, offers various pension schemes and saving plans to avail tax benefits for all individuals above the age of 60 who are looking for an effective long-term saving option. There are various annuity plans under the LIC Senior Citizen Scheme. These plans help the senior citizens of the country secure their future.
Key Features of LIC Senior Citizen Pension Schemes
Pradhan Mantri Vaya Vandana Yojana (PMVVY) is one of the 4 pension schemes offered by LIC and launched by the Government of India exclusively for senior citizens of 60 years and above. The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a modified scheme that includes pension rates and offers a loan, the interest of which will be recovered from the pension sum, payable under the plan. The applicable rate of interest is based on the option chosen by the individual and is approved by IRDAI.
LIC India released a notification in May 2020 that the sale of the LIC Senior Citizen scheme PMVVY is extended for a period of 3 years starting from the Financial year 2020-2021 up till 31st March 2023. It also mentioned that the LIC Senior Citizen Scheme shall provide an assured pension of 7.40% p.a. payable monthly.
LIC’s Pradhan Mantri Vaya Vandana Yojana features (snapshot from LIC India)
Also Read: Income Tax Slab for Senior Citizen
Pradhan Mantri Vaya Vandana Yojana
LIC Senior Citizen Scheme PMVVY is available offline at the LIC office or online at the LIC website http://www.licindia.in/. They can choose from the different frequency options available like monthly/quarterly/half-yearly etc. and select their preferred plan by paying a lump sum amount.
The scheme will then calculate the pension amount that the user will receive for the policy term of 10 years. At the end of 10 years, the purchasing amount is returned to the user. During the 10-year tenure of the policy, senior citizens can receive a minimum pension of Rs. 1,000 per month and a maximum pension of Rs. 10,000 per month based on the invested amount.
- PMVVY provides the assured rate of interest of 7.40 % per annum for 2020-21 and thereafter will be reset every year.
- PMVVY scheme can be purchased on a yearly, half-yearly, quarterly, or monthly basis depending on the pensioner’s requirement.
- PMVVY provides a maximum pension for a family as a whole. It comprises pensioner, his/her spouse, and dependents.
- The assured rate of return shall be payable for the full policy term of 10 years as per the frequency of monthly/quarterly/half-yearly/yearly as chosen by the individual at the time of purchase.
Also Read: Senior Citizen Fixed Deposit Interest Rates
Features of Pradhan Mantri Vaya Vandana Yojana
Rate of Return: For a period of ten years, the PMVVY scheme guarantees a return of 7% to 9% to subscribers. The government determines and revises the rate of return.
Pension Payment: During the policy term of ten years, a pension is paid at the end of each period at the frequency chosen (monthly, quarterly, half-yearly, or yearly).
Surrender Value: The scheme allows for early withdrawal during the policy’s term in exceptional circumstances, such as when the pensioner needs money to treat a critical/terminal illness in themselves or their spouse. In such cases, the pensioner will receive 98% of the purchase price as a surrender value.
Free Lock-In: If a policyholder is dissatisfied with the policy, he or she may return it to the LIC within 15 days (30 days if purchased online) of the policy receipt date, stating the reason for objections. The amount refunded during the free look period is the purchase price deposited by the policyholder, less any stamp duty and pension paid.
Exclusion: This policy’s purchase price return is subject to an exclusion. If a policyholder commits suicide, the entire purchase price is due.
Benefits of LIC PMVVY Scheme
Maturity Benefit: When the policy term of ten years is up, the entire amount (including the final pension and the purchase price) is paid out.
Death Benefit: If the subscriber dies during the policy’s term, the beneficiary will receive the purchase price.
Loan Benefit: After three years, a loan of up to 75% of the purchase price can be obtained to cover emergencies. However, the government will charge a rate of interest on the loan amount at periodic intervals, and the loan interest will be deducted from the pension amount payable under the policy.
Income Tax Implications of Pradhan Mantri Vaya Vandana Yojna:
In the case of a monthly pension scheme, the 7.4% annual interest equates to 7.66% p.a. Because the scheme is essentially a pension plan, it is exempt from GST and service charges. The scheme, however, does not qualify for income tax relief. The profits are taxable.
Eligibility Criteria for Pradhan Mantri Vaya Vandana Yojna
Any individual opting to enroll for the PMVVY scheme must fulfil the mentioned criteria:
- The minimum entry age for the policy is 60 years completed. There is no limit on the maximum entry age.
- Policy tenure is for 10 years.
- The maximum investment limit is Rs 15 lakh per senior citizen.
- The minimum and maximum pension offered by the policy are mentioned in the table below:
LIC’s Pradhan Mantri Vaya Vandana Yojana Pension Options ( Snapshot from LIC India)
LIC’s Pradhan Mantri Vaya Vandana Yojana Pension rates (Snapshot from LIC India)
PMVVY Premature Withdrawal Process
LIC Senior Citizen scheme also offers for premature withdrawal during the policy tenure for the treatment of any critical/ terminal illness of self or spouse. Some minimum premature withdrawal charges are applicable and 98% of the Purchase Price shall be refunded.
A loan facility is provided after the policy completes 3 years. The pensioner will be granted a maximum loan of 75% of the purchase price. An interest rate is applicable per annum which can be recovered from the pension instalments and the loan will be recovered from claim proceeds.
In any case of death of the pensioner during the policy term of 10 years, the purchase price of the policy shall be refunded to the beneficiary/nominee of the policy. At the end of tenure, the full purchasing amount is refunded along with final pension instalments if any.
The LIC Senior Citizen Pension Scheme is a great scheme that simply includes all the benefits that are required to secure the financial future of an individual after retirement. The different plans offered under the LIC Senior Citizen Pension Scheme precisely work in the favour of pensioners and efficiently provide them with long-term saving options.
The LIC Senior Citizen Scheme provides the pensioner with an assured pension so that they can live and enjoy their golden days of life with their families without any financial stress.
The minimum amount of pension can range from Rs. 1000, 3000, 6000, and 12,000, whereas maximum pension is Rs. 9250, 27,750, 55,500, and 1,11,000 for the monthly, quarterly, half-yearly and yearly plans, respectively.
There is no upper age limit for purchasing the PMVVY Scheme. All senior citizens of India aged 60 years (completed) and above can purchase this Scheme.
There is absolutely no difference if the PMVVY policy is taken offline. The plan benefit and pension rate are similar for both modes of sale.
Users are given the choice to select their preferred mode of pension from monthly/quarterly/half-yearly or yearly when taking the policy. The first instalment of pension payment starts from 1 year, 6 months, 3 months, or 1 month from the date of purchase, depending on the chosen mode of pension payment.
Loan facilities are available under PMVVY after the completion of 3 policy years. The maximum loan amount that can be granted is 75% of the Purchase Price.
Policy taken under LIC Senior Citizen Scheme can be surrendered anytime during the term of the policy under circumstances like the pensioner requiring money for treatment of any illness. After some minimum premature withdrawal charge, 98% of the purchase price is refunded to the user to their original mode of transfer.
The scheme allows for early withdrawal during the policy’s term in exceptional circumstances, such as when the pensioner needs money to treat a critical/terminal illness in themselves or their spouse. In such cases, the pensioner will receive 98% of the purchase price as a surrender value.
The SCSS scheme is better compared to PMVVY in terms of taxation and liquidity. However, the PMVVY scheme provides the same 7.4% return throughout the policy’s duration. The return on the SCSS scheme, on the other hand, may vary depending on the quarterly return rates set by the government.