Are you a senior citizen looking for a secure and reliable retirement plan? Look no further! We are excited to introduce you to the Pradhan Mantri Vaya Vandana Yojana (PMVVY) – a government-backed retirement scheme designed exclusively for senior citizens. With guaranteed returns, tax benefits, and additional features such as loans and death policies, PMVVY is a comprehensive solution for your financial and retirement planning needs. In this blog, we will delve into the details of PMVVY and shed light on its numerous advantages.
What is Pradhan Mantri Vaya Vandana Yojana?
Pradhan Mantri Vaya Vandana Yojana is the government of India-backed scheme, managed by Life Insurance Corporation of India. To abide senior citizens with their financial planning goals, the scheme was launched in 2017 and offers “non-market linked” returns, unlike NPS. Apart from guaranteed returns, the scheme also offers the following benefits:
- Periodic Pension payouts
- Tax Deductions under 80C
- Tax Benefits on interest and maturity
- Loan against the investment
- Term insurance
Would be discussing its feature as we proceed further. Buckle up for your retirement planning.
Investment, Eligibility, and Returns
Like other government-backed pension schemes such as the Atal Pension Yojana and Sukanaya Samridhi Yojana, this scheme’s interest rate is fixed by the government and revised annually, currently, the interest rate is fixed at 7.40% per annum.
With a minimum investment of 12,000 annually and an upper cap of 15,00,000 per annum, the scheme has a maturity period of 10 years and a lock-in period of 3 years. The scheme has eligibility criteria of a minimum age of 60 years, which is quite disproportionate to 18 in the case of NPS and PPF.
Loan Facility
During the lock-in period of 3 years, no pension is paid out but a loan of up to 90% of the purchase price is available for the scheme, which is a unique feature when compared to Atal Pension Yojana.
Here are some of the key points to remember about the loan facility under the PMVVY:
- The loan amount is up to 75% of the purchase price of the policy.
- The interest rate on the loan is determined by the LIC at periodic intervals.
- The loan amount will be repaid within the remaining policy term.
- If the policyholder dies before the loan is repaid, the loan amount will be deducted from the death benefit payable to the nominee.
If you are considering availing of the loan facility under the PMVVY, you should carefully read the terms and conditions of the scheme. You should also consult with a financial advisor to determine if the loan is right for you.
Premature Withdrawals
Withdrawing from a government-backed scheme is a tedious job, due to many complications and penalties, however, withdrawals are applicable in the following circumstances.
- Critical illness of the policyholder or spouse: In case of critical illness of the policyholder or spouse, the policyholder can withdraw 98% of the purchase price of the policy.
- Death of the policyholder: In case of the death of the policyholder, the nominee can withdraw the full purchase price of the policy, plus any accumulated interest.
- Medical emergency: In case of a medical emergency, the policyholder can withdraw up to 50% of the purchase price of the policy.
- Surrender: The policyholder can surrender the policy after completing five years of the policy term. In this case, the policyholder will receive the surrender value of the policy, which is calculated based on the prevailing interest rates.
It is important to note that there are penalties for premature withdrawal under the PMVVY. The penalty is 2% of the purchase price for the first year of the policy, and 1% of the purchase price for each subsequent year.
| Age of Policyholder at Withdrawal | Surrender Charge (%) |
| 60-65 years | 8% |
| 66-70 years | 10% |
| 71-75 years | 12% |
| 76-80 years | 14% |
| 81-85 years | 16% |
Post Death Benefits
The Pradhan Mantri Vaya Vandana Yojana offers a post-death benefit to the nominee of the policyholder. The post-death benefit is equal to the purchase price of the policy, plus any accumulated interest.
If the policyholder dies during the policy term, the nominee will receive the full purchase price of the policy. The nominee will also receive any accumulated interest that has accrued on the policy.
If the policyholder dies after the policy term, the nominee will receive the full purchase price of the policy, plus any accumulated interest, and the remaining pension installments.
The post-death benefit under the PMVVY is a good option for the nominee of the policyholder. The nominee will receive a lump sum amount, which can be used to meet any financial obligations, such as medical expenses or education expenses.
Here are some of the key points to remember about the post-death benefit under the PMVVY:
- The post-death benefit is equal to the purchase price of the policy, plus any accumulated interest.
- The nominee will receive the post-death benefit in one lump sum.
- The post-death benefit is tax-free.
If you are considering investing in the PMVVY, you should carefully read the terms and conditions of the scheme. You should also consult with a financial advisor to determine if the scheme is right for you.
Here are some of the documents that will be required to claim the post-death benefit under the PMVVY:
- Death certificate of the policyholder
- Policy document
- Identity proof of the nominee
- Address proof of the nominee
- Bank account details of the nominee
The claim can be submitted to the LIC branch office where the policy is existing. The claim will be processed within 30 days of submission.
Comparison with Atal Pension Yojana and National Pension Scheme
| Feature | Atal Pension Yojana (APY) | National Pension Scheme (NPS) | Pradhan Mantri Vaya Vandana Yojana (PMVVY) |
| Age Limit | 18-40 years | 18-60 years | From the age of 60 years |
| Minimum investment | INR 100 per month | INR 1,000 (lump sum) or INR 500 (monthly) | INR 1,000 (lump sum) or INR 1,000 (monthly) |
| Maximum investment | INR 5,000 per month | INR 1.5 lakh (in a financial year) | INR 15 lakh |
| Lock-in period | None | 3 years | 3 years |
| Maturity | 60 years | 60 years or above | 60 years |
| Interest rate | 8% p.a. | 8% to 14% p.a. (depending on the pension fund) | 7.4% p.a. |
| Risk associated | Low | High | Low |
| Special features | The auto-debit facility, no lock-in period, guaranteed pension | Choice of pension funds, tax benefits, withdrawal options | Guaranteed pension, loan facility |
Conclusion
The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a government-backed pension scheme that is designed to provide a guaranteed pension to senior citizens after retirement. The scheme is open to senior citizens between the ages of 60 and 80 years. The minimum investment amount to the PMVVY is INR 1,000 and the maximum investment amount is INR 15 lakh. The PMVVY offers a guaranteed pension of 7.4% p.a. The scheme has a lock-in period of 3 years.
Please visit the PMVVY website for the latest updates and development.
