Pradhan Mantri Vaya Vandana Yojana (PMVVY) | Government announced Extension
Source | Press Information Bureau
GS Paper II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
Context: In order to ensure the welfare of the Senior Citizens and to ensure their old age income security, Government of India approves the extension of Pradhan Mantri Vaya Vandana Yojana (PMVVY).
Key Highlights of the recent updates regarding Pradhan Mantri Vaya Vandana Yojana (PMVVY)
As per the government notification, following approvals has been given with respect to the Pradhan Mantri Vaya Vandana Yojana. Apart from following mentioned changes, all other terms and conditions of the scheme remains the same.
- Pradhan Mantri Vaya Vandana Yojana (PMVVY) has been extended for another period of 3 years beyond 31st March 2020, up to 31st March, 2023.
- Initially an assured rate of return of 7.40 % per annum for the year 2020-21 per annum has been allowed for the approval. However, it would have to be reset every year thereafter.
- Approval has also been provided for the annual reset of assured rate of interest with effect from 1st April of financial year in line with revised rate of returns of Senior Citizens Saving Scheme (SCSS) upto a ceiling of 7.75% with fresh appraisal of the scheme on breach of this threshold at any point.
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- The difference between the market rate of return generated by LIC (net of expenses) and the guaranteed rate of return under the scheme are to be considered while looking up to the expenditures to be incurred.
- Approval has also been provided for the Capping Management expenses at 0.5% p.a. of funds of the scheme for first year of scheme in respect of new policies issued and thereafter 0.3% p.a. for second year onwards for the next 9 years.
- As part of the approval, the Finance Minister has been authorized to approve annual reset rate of return at the beginning of every financial year.
- The minimum investment has also been revised to Rs.1,56,658 for pension of Rs.12,000/- per annum and Rs.1,62,162/- for getting a minimum pension amount of Rs.1000/- per month under the scheme.
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PRELIMS Background Bites
About Pradhan Mantri Vaya Vandana Yojana (PMVVY)
Pradhan Mantri Vaya Vandana Yojana (PMVVY) is basically a Pension Scheme which was announced by the Government of India exclusively for the senior citizens aged 60 years and above which was available from 4th May, 2017 to 31st March, 2020.
Following the above discussed approval by the Government of India, the scheme is now extended up to 31st March, 2023 for a further period of three years beyond 31st March, 2020.
Benefits Under the Scheme
- Initially the scheme will provide an assured rate of return of 7.40 % per annum for the year 2020-21 per annum and thereafter to be reset every year.
- Pension is payable at the end of each period, during the policy term of 10 years, as per the frequency of monthly/ quarterly/ half-yearly/ yearly as chosen by the pensioner at the time of purchase.
- The scheme is exempted from GST.
- On survival of the pensioner to the end of the policy term of 10 years, purchase price along with final pension installment shall be payable.
- Loan upto 75% of Purchase Price shall be allowed after 3 policy years (to meet the liquidity needs).
- Loan interest shall be recovered from the pension installments and loan to be recovered from claim proceeds.
- The scheme also allows for premature exit for the treatment of any critical/ terminal illness of self or spouse. On such premature exit, 98% of the Purchase Price shall be refunded.
- On death of the pensioner during the policy term of 10 years, the Purchase Price shall be paid to the beneficiary.
- The ceiling of maximum pension is for a family as a whole, the family will comprise of pensioner, his/her spouse and dependants.
- The shortfall owing to the difference between the interest guaranteed and the actual interest earned and the expenses relating to administration shall be subsidized by the Government of India and reimbursed to the Corporation.
Eligibility under the Scheme
- Minimum Entry Age: 60 years (completed)
- Maximum Entry Age: No limit
- Policy Term : 10 years
- Investment limit : Rs 15 lakh per senior citizen
- Minimum Pension: Rs. 1,000/- per month
- Rs. 3,000/- per quarter
- Rs.6,000/- per half-year
- Rs.12,000/- per year.
- Maximum Pension: Rs. 12,000/- per month
- Rs. 30,000/- per quarter
- Rs. 60,000/- per half-year
- Rs. 1,20,000/- per year
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