- Date : 18/06/2020
- Read: 4 mins
With less than three months remaining in the financial year, find out if PMVVY is the scheme you should invest in.
Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a government-initiated retirement income scheme designed to meet the financial needs of senior citizens. It is implemented through the Life Insurance Corporation of India (LIC) and can be availed of between 4 May 2017 and 31 March 2020.
Other schemes intended for the same age group had been launched earlier, such as Varishtha Pension Bima Yojana 2003 and Varishtha Pension Bima Yojana 2014, which were well-received.
PMVVY aims to protect people above the age of 60 from market uncertainties and dips in interest rate. It offers a pension based on a guaranteed 8% rate of return. The purchase amount ranges from a minimum of Rs 1,50,000 and a maximum of Rs 15,00,000.
Who is eligible for PMVVY?
To be eligible for the PMVVY scheme, one must fulfil the following criteria:
- Be at least 60 years of age (there’s no upper age limit)
- The PMVVY policy can be availed of for a maximum period of 10 years
- The pension against this policy can be received on a monthly, quarterly, half-yearly, or annual basis
- The minimum pension for a month is Rs 1000 and can go up to Rs 10,000; this will be applicable proportionately depending on the payment interval
How does one apply for PMVVY?
A PMVVY policy can be purchased by filing a form and supplying the required documents. The application can be made here and the following documents should be provided:
- Copy of PAN card
- Copy of address proof (Aadhaar, passport etc.).
- Cancelled cheque or copy of bank passbook (the pension amount will be credited to this account)
Please note that linking of Aadhaar has been made mandatory in case of PMVVY policies, as per a recent notification from the Finance Ministry.
Why avail of PMVVY?
There are many reasons why PMVVY can prove to be a very beneficial scheme for senior citizens. Here’s why they should consider it:
- The policyholder gets a regular income for a period of 10 years at a guaranteed rate of return of 8%.
- The policyholder can choose to receive the pension payment at any of the available frequency options as per their convenience.
- In case of the death of the policyholder during the tenure of the policy, the purchase price is transferred to the beneficiary.
- If the policyholder survives the policy duration, the purchase price of the policy is returned to them along with the final pension amount.
- The policyholder can avail of a loan against the policy after the completion of three years. Loans of 75% of the purchase price can be taken at an interest rate of 10%. The interest on the loan is recovered from the pension amount and is payable half-yearly during the tenure of the policy period.
- The PMVVY policy offers a ‘free look’ period. A person can surrender a PMVVY policy within 15 days of purchase (30 days if the policy is purchased online) if they are not satisfied with the terms of the policy. The purchase price is refunded to the policyholder after deducting the stamp duty charges thereon.
- The policy can be surrendered prematurely in case of terminal or critical illness of the policyholder or their spouse. In such cases, 98% of the purchase price is paid back to the policyholder.
How to purchase a PMVVY policy?
A PMVVY policy can be purchased by paying a lump sum amount, which can be done while choosing the purchase price of the policy or the pension amount. The policy has a minimum and maximum purchase price of Rs 1,50,000 and Rs 15,00,000 respectively.
Senior citizen can receive pension payment either monthly, quarterly, half-yearly or annual basis . The amount is made available to the policyholder via an Aadhaar-enabled payment system or National Electronics Fund Transfer (NEFT). Now that you know about PMVVY, look at these types of pension plans and their tax benefits.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas