Pradhan Mantri Pension Yojana- A ₹9250 pm Guaranteed Pension Scheme. Should you opt for it?
Pradhan Mantri Pension Yojana is popularly known as Pradhan Mantri Vaya Vandana Yojana. This Pradhan Mantri pension scheme is a flagship pension scheme of the Government of India solely meant for the senior citizens of India.
PM Pension Yojana was meant for ensuring the income security and welfare of the senior citizens of India. This Social Security Scheme was supposed to be closed by 31st March 2020.
This means no fresh investment would have been allowed in this scheme after 31st March 2020. But considering the financial hardships faced by the people across India due to this COVID 19 pandemic, the G.O.I have extended this Pradhan Mantri Vaya Vandana Yojana(PMVVY) till 31st March 2023.
⇒What is Pradhan Mantri Pension Yojana?
Pradhan Mantri Pension Yojana which is popularly known as Pradhan Mantri Vaya Vandana Yojana is an elderly pension scheme offered by the Life Insurance Corporation of India(LIC).
This scheme has now been extended till 31.03.2023. This scheme has gained huge popularity within a short span of time since there are a few guaranteed pension scheme backed by the G.O.I with a higher interest rate being offered.
This is a guaranteed pension scheme offered by LIC with a specified rate of interest yearly reset for a maximum period of 10 years.
It is being quite difficult for elderly people to maintain their livelihood as the interest rates on various financial instruments such as Fixed Deposits, Recurring Deposits, Savings Accounts, are shrinking very sharply.
Therefore, elderly people who live completely on pension, bank interest have no option left but to choose this pm pension yojana, since the present interest rate being offered is 7.40% annually for F.Y 2020-21.
This Pradhan Mantri Pension Scheme is offering a reasonably higher interest rate (7.40% p.a payable monthly for F.Y 2020-21) which is at par with the Senior Citizen Savings Scheme.
Currently, there is no other guaranteed pension plan available in the market offering such a higher rate of interest. So, this is really a good investment option for elderly people.
⇒Features of Pradhan Mantri Pension Yojana
- PMVVY: PM Pension Yojana is popularly known as Pradhan Mantri Vaya Vandana Yojana(PMVVY);
- Availability: This Pradhan Mantri Pension Scheme is open for investment till 31st March 2023;
- Eligibility: To receive a pension under this Pradhan Mantri Vaya Vandana Yojana, the pensioner has to be more than 60 years old;
- Assured Pension: PM Pension Yojana is a guaranteed pension plan offered by the LIC;
- Immediate Annuity: It is an Immediate Annuity Plan where one starts receiving pension immediately after investment;
- Interest Rate: The current interest rate being offered is 7.40% p.a. payable monthly for F.Y 2020-21. This interest rate is reset annually effective from 1st April every year;
- Maximum Investment: The maximum investment under this Pradhan Mantri Pension Scheme is Rs.15 Lakh;
⇒Benefits of Pradhan Mantri Pension Yojana
- Pension Payout: Under this PM Pension Yojana, the pension is paid for a specified period of 10 years as per the option chosen.e. monthly, quarterly, half-yearly or annually;
- Death Benefit: If during the policy period of 10 years, the pensioner dies, the investment value or purchase price shall be refunded to the beneficiary;
- Maturity Benefit: On successful completion of 10 years period, the full purchase price/investment value will be refunded to the pensioner.
You may want to read the following:
⇒Eligibility Criteria of PM Pension Yojana
To be eligible to invest in this Pradhan Mantri Pension Scheme, one needs to complete 60 years of age. There is no limit of maximum age. This scheme is valid for a maximum period of 10 years only from the date of investment.
|Minimum Age||60 Years|
|Maximum Age||No limit|
|Policy validity||10 Years|
|Maximum investment||Rs.15 Lakh|
⇒Pension amount under PM Pension Yojana
Pradhan Mantri Vaya Vandana Yojana ensures the below minimum pension amount for the pension period of monthly, quarterly, half-yearly and yearly.
Minimum Pension amount under PMVVY
|Period of pension→||Monthly||Quarterly||Half yearly||Yearly|
|Minimum Pension amount(Rs.)→||1000||3000||6000||12000|
Maximum Pension amount under PMVVY
|Period of pension→||Monthly||Quarterly||Half yearly||Yearly|
|Maximum Pension amount(Rs.)→||9250||27750||55500||111000|
So, from the above table, you can check that the minimum and maximum monthly pension amount is Rs.1000 and Rs.9250 respectively.
⇒Purchase price/ Investment value of PM Pension Yojana
The PMVVY has mandated the following minimum and maximum investment value/ purchase price under the PM Pension Yojana.
|Period of pension||Minimum investment(Rs.)||Maximum investment(Rs.)|
Thus, you can see from the above table that the minimum and maximum purchase price under this scheme is Rs.1,56,658.00 and Rs.15,00,000 respectively.
⇒Taxability on pension amount:
The income so received as pension from this scheme, is taxable as per the I.T Act and is to be treated as income under the head Income from Salary. Therefore, this pension income will be added with other income if any earned by the pensioner and tax will be calculated on the normal income tax slab for Senior Citizens.
⇒Is there any loan facility available under Pradhan Mantri Pension Yojana?
Loan Facility: Yes. The PMVVY allows a loan facility only after completion of 3 years from the date of issuance of the policy. However, the maximum loan that can be availed under this scheme is 75% of the purchase price.
The rate of interest on the loan amount will be decided periodically. However, an interest rate of 9.5% p.a to be charged for loans sanctioned up to 30.04.2021.
⇒Is there any Surrender Value in Pradhan Mantri Pension Yojana?
Surrender Value: While we are talking about surrender value, we must keep in mind that, the policy needs to be surrendered only when an extreme emergency such as medical needs arises to the pensioner or any of his family members.
Otherwise, for surrendering the policy, only 98% of the purchase price will be refunded back. That means there is a penalty of 2% for not continuing the policy till the maturity period of 10 years.
⇒What is the Free Look period in PMVVY?
Like every policy, this Pradhan Mantri Pension Scheme also has a free look period of 15 days to return the policy if not so satisfied after buying.
However, if the policy is bought online, within 30 days, the policy must be returned and one can get a refund of the full purchase price.
⇒Applicability of Section 45 of Insurance Act 1938?
Though this is a pension product offered by the LICI, section 45 of the Insurance Act 1938 is applicable to this policy also.
As per the said act, a policy can not be challenged or called in question on the grounds of fraud or misstatements or suppression of facts after the expiry of 3 years from the date of issuance of the policy or date of commencement of risk whichever is later.