8% LIC Pradhan Mantri Vaya Vandana Yojana Pension Plan
8% LIC Pradhan Mantri Vaya Vandana Yojana Pension Plan
Govt of India in its budget for FY2018-2019 has indicated that it would soon announce pension plan for Senior Citizen. Couple of days back, Govt. of India announced Pradhan Mantri Vaya Vandana Yojana Pension Plan (PMVVY) which would be administered by LIC. This pension plan would provide immediate pension of 8% on the invested amount. What are the features of LIC Pradhan Mantri Vaya Vandana Yojana Pension Plan? What are the positives and negatives of Pradhan Mantri Vaya Vandana Yojana Scheme? Are there any better alternatives instead of just investing in this LIC Pradhan Mantri Vaya Vandana Scheme?
Also Read: How to Open New Pension Scheme (NPS) Online?
Features of LIC Pradhan Mantri Vaya Vandana Yojana Pension Plan
- This pension scheme provides guaranteed pension of 8%.
- This is single premium pension plan.
- Minimum age of entry is 60 years
- No Maximum age of entry. Means, any one above 60 years can join without any restriction.
- This pension plan opens for subscription from 4th May, 2017 and closes on 3rd May, 2018.
- Pension plan is for 10 years tenure.
- Minimum pension plan payable is Rs 1,000/Monthly, Rs 3,000/Quarterly, Rs 6,000/Half Yearly and Rs 12,000/Per annum.
- Maximum pension plan payable is Rs 5,000/Monthly, Rs 15,000/Quarterly, Rs 30,000/Half Yearly and Rs 60,000/Per annum.
- One needs to invest Rs 7.5 Lakhs to get the maximum pension of Rs 5,000 per month.
- Pension amount would be directly credited to SB account.
- If Pensioner commits suiside during the tenure of pension plan, nominee / legal heirs would get the entire purchase price of the pension plan.
- This plan is administered and run by LIC of India.
- Pensioner would get loan upto 75% of the purchase price during the tenure. The interest on the loan would be deducted from pension amount.
- One can surrender this policy under exceptional cases only.
What is the single Premiums payable to get the minimum Pension?
- If you want to get minimum pension plan, here are the single premiums to be invested.
- Rs 1,000 monthly pension – Need to invest Rs 1.5 Lakhs
- Rs 3,000 quarterly pension – Need to invest Rs 1.49 Lakhs
- Rs 6,000 half yearly pension – Need to invest Rs 1.47 Lakhs
- Rs 12,000 yearly pension – Need to invest Rs 1.44 Lakhs
What is the single Premiums payable to get the Maximum Pension?
- If you want to get maximum pension plan, here are the single premiums to be invested.
- Rs 5,000 monthly pension – Need to invest Rs 7.5 Lakhs
- Rs 15,000 quarterly pension – Need to invest Rs 7.45 Lakhs
- Rs 30,000 half yearly pension – Need to invest Rs 7.38 Lakhs
- Rs 60,000 yearly pension – Need to invest Rs 7.22 Lakhs
What are the various benefits available on LIC Pradhan Mantri Vaya Vandana Yojana Pension plan?
1) Benefit during Policy Period: Pensioner would get regular pension during the policy term based on option chosen by them (Monthly, Quarterly, Half Yearly or Yearly)
2) Death Benefit: In case of death of the pensioner, nominee / legal heirs would get the purchase price of the pension plan. This applies even if pensioner commits suicide.
3) Maturity Benefit: If the pensioner survives till the end of the policy tenure, they would get the purchase price of the pension plan along with last installment of the pension amount.
What are the positives in LIC Pradhan Mantri Vaya Vandana Yojana Pension Plan?
- Guaranteed 8% returns for 10 years.
- This is good plan compared to bank FD’s as such FD interest can go down in coming years and not guaranteed.
- In this plan, Purchase price is fixed for all ages. In annuity / pension plans issued by LIC or any other private insurance companies, the investment amount would differ based on the age of the pensioner.
What are the Negative points in LIC Pradhan Mantri Vaya Vandana Yojana Pension Plan?
- Major disappointing thing in this plan is no Income Tax Benefits available. One would not get any tax benefits on the invested amount. Also no income tax benefit on the interest received. The pension amount received is taxable in the hands of the pensioner.
- No easy liquidity. One can liquidate this policy only under exceptional cases like medical treatment for specific diseases. If there is any emergency requirement to withdraw invested amount, it is not possible in this policy.
- 8% returns would be low considering inflation and price increase in future.
- Max Pension of Rs 5,000 per month is low in the current living world. This amount would not be sufficient even for medicines that may be required during such old age.
- Maximum Rs 5,000 Pension per family (including all family members) makes this plan unattractive. If one old aged husband and wife expect 5K pension for each member through this plan, it is not possible.
What are the alternative investment options available compared to LIC Pradhan Mantri Vaya Vandana Yojana Pension Plan?
Considering certain negative points, here is the list of some of the alternative investment options one can consider.
1) Post office Senior Citizen Saving Scheme: This scheme is for 5 years and offers 8.4% interest rate along with income tax benefit u/s 80C. One can do premature withdrawal with some interest rate deduction.
2) Govt Bonds: Govt bonds offer 8%. Interest is payable half yearly. No income tax benefits available in this plan. It has lock in period of 6 years.
3) Tax Free Bonds: If the individual has other sources of income and tax payer, it is better to invest in tax free bonds that can give 6% to 7% tax free returns. These can be purchased in stock market in secondary segment.
4) MIP Mutual Funds: These mutual funds can provide regular returns, not guaranteed, but can be considered as best alternative to any other saving scheme for Senior Citizen. These can fetch 7% to 9% returns though not guaranteed. You can read Top 10 MIP Mutual Funds to invest in 2017 here.
Should you consider investing in LIC Pradhan Mantri Vaya Vandana Yojana Pension Plan?
All this is fine, but should a senior citizen invest in LIC Pradhan Mantri Vaya Vandana Yojana Pension Plan or not. It depends on view from Senior Citizen’s side. Generally they do not want to take any risk. All other schemes have risk that the interest rates can go down in future. However PMVVY can provide 8% guaranteed returns for next 10 years. If Senior Citizen wants to get guaranteed pension without taking any risk and has sufficient amount for any emergency need, they can opt for such schemes. Alternatively, they can invest in other investment options indicated above. But if they still want to consider this plan, diversify some amount in this pension plan and some amount in alternative options.
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LIC Pradhan Mantri Vaya Vandana Yojana Pension Plan