Should A Senior Citizen Invest in Pradhan Mantri Vaya Vandana Yojana

Pradhan Mantri Vaya Vandana Yojana (PMVVY) was launched a few years back to provide an avenue of income for senior citizens in the country. It expired in March 2020 but was relaunched this month.

Let us dive into the details of the scheme –

Features

It is a non-linked non-participating scheme.
It is available for purchase till 31^st March 2023.
It is a 10-year scheme which means you will get a pension for 10 years.
People above the age of 60 years can purchase this scheme.
It can be purchased by payment of a lump-sum amount. The purchase price depends on the mode of pension that the scheme owner wants –

Mode of pension	Yearly	Half Yearly	Quarterly	Monthly
Minimum Purchase Price	₹1,56,658	₹1,59,574	₹1,61,074	₹ 1,62,162
Maximum Purchase Price	₹14,49,086	₹ 14,76,064	₹ 14,89,933	₹15,00,000

The first installment will be paid after one year, 6 months, 3 months, or one month as per the mode selected.
The scheme can be purchased from LIC either online or offline.
In the event of the death of the owner during the policy term, the purchase price shall be returned to the beneficiary.
The pension income will be added to the individual’s total income and will be subject to tax as per the tax slab applicable.
It is available only for residents of India. Pension payment will be released when Life Certificate is presented in the month of November every year as per LIC Proforma or online “Jeevan Pramaaan”.

Read – Facts about Retirement Planning

Benefits

The rate of interest on policies purchased until 31st March 2021 will be 7.40% p.a. payable monthly (effective 7.66% p.a.). The interest rate on policies purchased after 31st March 2021 will be decided by the Finance Ministry at the beginning of each financial year.
The minimum and maximum pension amount that the scheme owner can get depends on the mode of pension –

Mode of pension	Yearly	Half Yearly	Quarterly	Monthly
Minimum Pension	₹12,000	₹6,000	₹3,000	₹1,000
Maximum Pension	₹1,11,000	₹55,000	₹27,750	₹9,250

The scheme owner can avail of a loan after 3 years of purchase. The maximum amount of loan can be up to 75% of the purchase price. Interest on the loan will be deducted from a pension paid.
The scheme allows for premature surrender for the treatment of critical, terminal illness of self or spouse. The surrender value payable will be 98% of the purchase price.

Check- 5 Steps For Happy Retirement.

Should A Senior Citizen Invest In The Pradhan Mantri Vaya Vandana Yojana?

The policy is backed by the government. So there is low credit risk. This is a low-risk investment. The interest rate is slightly higher than the interest rate on fixed deposits in many banks. It will provide a regular source of income for 10 years. A senior citizen and spouse can invest up to ₹ 30,00,000 in the scheme. It also provides features of premature exit and loans against investment.

On the other hand, the interest rate is not fixed. As compared to the Senior Citizens Savings Scheme and NPS, it does not qualify for 80C tax deduction. Moreover, you can easily exit out of the SCSS on payment of penalty. You can only exit from this investment prematurely in case of a critical or terminal illness of self or spouse. If you are from a higher income bracket or have expenditure that far increases the returns from this, you will have to look at other sources of money. Investments in Mutual funds and stocks will give you higher returns albeit with higher risk. NRIs are not allowed to invest in this scheme.

It will be good to invest in multiple products for retirement, which gives a regular source of income. At the same time, keep an eye on your liquidity and ensure that you have investments that can be liquidated more easily as compared to the Vaya Vandana Yojana. You can go for this product if you want a simple product that gives a regular source of income and your income and wealth sources are limited. Read about Wealth Creation Here – Key To Wealth creation.

This post is written by Vidya

If you have any questions related to Pradhan Mantri Vaya Vandana Yojana (PMVVY) – add in the comment section.