Coronavirus has taken a huge toll on economy, impacting our lives in more ways that one. The central banks across the world cut interest rates to save their economy from falling into recession. The returns from bank FDs go below 7 per cent-mark. Senior citizens often depend on banks FDs for a regular income.
Here is an attractive investment option for senior citizens which gives over 7% returns amid falling FD rates — Pradhan Mantri Vaya Vandana Yojana or PMVVY scheme. The Life Insurance Corporation of India (LIC) has recently modified the interest rates of PMVVY scheme. Launched in 2017, this pension scheme for senior citizens will attract a fixed interest rate for FY 2020-21. The scheme will provide an assured rate of return of 7.40% per annum in FY21. This plan will be available for sale for three financial years — up to March 2023.The scheme can be purchased offline as well as online from LIC website. LIC is solely authorised to run the scheme that offers a total payout not exceeding ₹15 lakh.
The policy has a 10-year tenure and for policies sold in the first financial ending March 2021, the scheme will provide an assured rate of return of 7.40% per annum, but will be payable monthly for the entire duration of 10 years. Senior citizens can draw a minimum pension of ₹1,000 per month depending on the amount invested in the scheme. The maximum pension amount is limited at ₹9,250 per month.
For policies sold during the next two financial years, the applicable assured rate of interest will be reviewed and decided at the beginning of each financial year by government. The minimum investment has also been revised to ₹1,56,658 for pension of ₹12,000 per annum and ₹1,62,162 for getting a minimum pension amount of ₹1000 per month under the scheme.
The minimum purchase price for monthly mode is ₹1,62,162, ₹1,61,074 for quarterly pension, ₹1,59,574 for half-yearly mode and ₹1,56,658 for yearly mode. The maximum pension one can get under this scheme will be ₹9,250 per month, ₹27,750 per quarter, ₹55,500 half-yearly and ₹1,11,000 on annual payout basis, LIC said.
Total amount of purchase price under all the policies under this plan and all the policies taken under earlier versions of the scheme allowed to a senior citizen shall not exceed ₹15 lakh.
The scheme can be purchased by a lump sum purchase price and the pensioner has the option to choose either the amount of pension or the purchase price. At the time of buying the scheme, the pensioner can choose monthly/quarterly/half yearly or yearly mode of pension.
On survival of the pensioner during the policy term, pension in arrears (at the end of each period as per mode chosen) shall be payable, LIC said, adding that on death of the pensioner during the policy-term, the purchase price shall be refunded to the nominee/legal heirs.
If the pensioner lives through the policy term, the purchase price and the final pension installment shall be payable.
The policy also allows loan up to 75% of purchase price after three policy years. The scheme also allows for premature exit for treatment of any critical/terminal illness of self or spouse and the surrender value payable shall be 98% of the purchase price.
