What is Pradhan Mantri Vaya Vandana Yojana?

The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a crucial financial initiative by the Government of India to provide senior citizens with social security and financial stability. Launched in 2017, the scheme has undergone several iterations to address the evolving needs of the elderly population. The latest version, PMVVY 2023, offers a secure investment avenue for senior citizens while adapting to the changing economic landscape.

This scheme, which started on May 4, 2017, aims to offer financial support to senior citizens by providing them with regular pensions when interest rates fall. Let us explore the details of the PMVVY scheme.

Features and Benefits of Pradhan Mantri Vaya Vandana Yojana (PMVVY)

The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a government-backed pension scheme that provides financial security to senior citizens in India. This scheme offers multiple features and benefits to ensure a steady income stream post-retirement. Below are the detailed aspects of the PMVVY:

Retirement Financial Security Via Pension Payment

PMVVY is designed to provide a regular pension to individuals aged 60 and above, ensuring financial stability during retirement. The scheme allows for a guaranteed pension based on the amount invested, offering peace of mind to retirees who may not have other sources of income. The fixed pension plan helps cover daily living expenses, medical costs, and other necessities.

Assurance of Returns

One of the standout features of PMVVY is the assurance of returns. The scheme guarantees an interest rate on the invested amount, translating to a regular pension. This assured return benefits senior citizens who prefer a low-risk investment option. The guaranteed rate ensures that retirees can plan their finances without worrying about market fluctuations.

Periodic Payout Options

PMVVY offers flexibility in the form of periodic payout options. Investors can receive their pension monthly, quarterly, half-yearly, or annually, depending on their financial needs and preferences. This flexibility allows for better financial planning and expense management, ensuring that retirees can align their pension payments with their personal budgetary requirements.

Maturity Benefit

Upon the completion of the 10-year policy term, PMVVY provides a maturity benefit. The maturity benefit is equal to the purchase price of the scheme along with the final pension installment. This ensures that the invested capital is returned to the policyholder after the policy term, providing an additional financial cushion.

Death Benefit

In the unfortunate event of the policyholder’s death during the policy term, the scheme ensures that the beneficiary receives the entire purchase price. This death benefit feature offers financial protection to the policyholder’s family members, ensuring that their loved ones are financially secure even in their absence.

Surrender Value

PMVVY allows for the premature exit or surrender of the policy under certain circumstances, such as the policyholder’s or their spouse’s critical illness. In such cases, the policyholder can surrender the policy and receive a surrender value of 98% of the purchase price. This feature provides financial flexibility and support in times of need.

Free Lock-in Period

The scheme has a free lock-in period of 15 days (30 days if the policy is purchased online). During this period, if the policyholder is not satisfied with the terms and conditions of the policy, they can return the policy and get a refund of the purchase price after deducting the stamp duty charges. This lock-in period ensures that investors can reconsider their investment decisions.

Loan Facility

PMVVY provides policyholders with a loan facility after three policy years. Policyholders can borrow up to 75% of the purchase price, ensuring they have access to funds in an emergency or financial need. The interest on the loan is recovered from the pension payments, and the loan amount is adjusted from the maturity proceeds or surrender value.

Exclusion

PMVVY has minimal exclusions, making it a highly inclusive scheme for senior citizens. There are no specific exclusions regarding the policyholder’s cause of death. Whether the death is due to natural causes or accidental, the death benefit is payable to the nominee. PMVVY is a reliable and secure investment option for senior citizens seeking financial security.

Eligibility Criteria for PMVVY

PMVVY offers an assured return on investment, ensuring a steady income stream during retirement. To avail of the benefits of PMVVY, individuals must meet certain eligibility criteria:

Age Requirement

The minimum age of entry for PMVVY is 60 years. There is no maximum age limit, making it accessible to all senior citizens who meet the minimum age criterion.

Residency

The scheme is open to all Indian residents. Non-resident Indians (NRIs) are not eligible to invest in PMVVY.

Investment Limit

The minimum purchase price is ₹1.5 lakh, while the maximum purchase price is ₹15 lakh per senior citizen. This cap ensures that the benefits are distributed among more individuals.

Policy Term

The policy term is fixed at 10 years. During this period, the policyholder will receive regular pension payments per the chosen payout frequency.

Purchase Price Payment for Different Periodic Payouts under PMVVY

PMVVY offers flexibility in periodic payouts, allowing policyholders to choose the payout frequency that best suits their financial needs. The purchase price varies based on the chosen payout option. Here are the details:

Monthly Payout

The minimum purchase price for a monthly pension payout is ₹1.5 lakh, and the maximum is ₹15 lakh. The pension amount is directly proportional to the invested amount.

Quarterly Payout

For a quarterly pension payout, the purchase price ranges from ₹1.61 lakh to ₹14.61 lakh. The quarterly payouts offer a slightly higher pension amount compared to monthly payouts.

Half-yearly Payout

For a half-yearly pension payout, the purchase price ranges from ₹1.59 lakh to ₹14.76 lakhs. This option provides a higher pension amount due to the less frequent payouts.

Annual Payout

The purchase price for an annual pension payout ranges from ₹1.56 lakh to ₹14.49 lakhs. Due to its frequency, the annual payout option offers the highest pension amount among all periodic payout options.

Benefits of Pension with Assurance

PMVVY provides various benefits that ensure senior citizens’ financial security and peace of mind. Below are the key benefits:

Maturity Benefit

At the end of the 10-year policy term, PMVVY provides a maturity benefit. The maturity benefit includes the purchase price return and the final pension installment. This ensures the policyholder receives their initial investment back, providing additional financial security.

Death Benefit

In the unfortunate event of the policyholder’s death during the policy term, the nominee or beneficiary will receive the entire purchase price. This death benefit ensures the policyholder’s family is financially protected, offering significant assurance during difficult times.

Surrender Value

PMVVY allows policyholders to surrender the policy prematurely under specific circumstances, such as the critical illness of the policyholder or their spouse. In such cases, the policyholder can surrender the policy. This feature provides liquidity and financial support during emergencies.

Loan Facility

After completing three policy years, PMVVY policyholders can take out a loan. The interest on the loan is adjusted from the pension payments, and the loan amount is recovered from the maturity proceeds or surrender value. This loan facility ensures that policyholders can access funds when needed without breaking their investment.

Documents Required for the Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Here are the necessary documents one must submit before enrolling in Pradhan Mantri Vaya Vandana Yojana:

• Aadhaar Card
• Proof of Age
• Proof of Residence
• Passport-size photos of the applicant
• Relevant Document/Declaration to show the retired status of the applicant

Examples of Pension Rates under the PMVVY scheme

Consider a senior citizen, Mr. Sharma, aged 65, who invests ₹10 lakh in the scheme. The chosen payout frequency determines the pension rates and is subject to change based on prevailing market conditions.

Example 1: Monthly Payout

Mr. Sharma invests ₹10 lakh in the PMVVY scheme.

The applicable pension rate for a monthly payout is, for instance, 7.4% per annum.

Monthly Pension = Purchase Price * Pension Rate / 12

Monthly Pension = ₹10,00,000 * 7.4% / 12 = ₹6,167

Therefore, Mr. Sharma will receive a monthly pension of ₹6,167 in this scenario.

Example 2: Annual Payout

Let us consider the same investment amount of ₹10 lakh.

The pension rate for an annual payout might be 7.6% per annum.

Annual Pension = Purchase Price * Pension Rate

Annual Pension = Purchase Price * Pension Rate

In this case, Mr. Sharma would receive an annual pension of ₹76,000.

How to Apply for Pradhan Mantri Vaya Vandana Yojana (PMVVY)?

One can apply for Pradhan Mantri Vaya Vandana Yojana online and offline. To apply for this scheme, you need to follow the below-mentioned steps:

Pension Payment Modes

Under the Pradhan Mantri Vaya Vandana Yojana, the pension can be paid monthly, quarterly, half-yearly, or annually, according to the policyholder’s preference. The payment for the retirement can be made via the Aadhaar Enabled Payment System or National Electronics Fund Transfer (NEFT).

Maximum Investment In PMVVY

Under the PMVVY scheme, the policyholder can invest in an amount of up to ₹1.5 lakhs. This limit applies to the primary investor. To avail of the return of ₹1,000 per month from the scheme, you must have a minimum investment of ₹1.5 lakhs.

Key takeaways

• The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a financial initiative that provides senior citizens with social security and financial stability.
• Under this scheme, the policyholder will receive an assured return of 7.4% annually for the policy duration.
• If a critical illness affects the policyholder or their spouse, a premature exit may be considered to meet the high medical expenses.
• Policyholders can choose monthly, quarterly, half-yearly, or annual pension payments.
• PMVVY provides a return on purchase price as a maturity benefit at the end of the policy term.
• It includes death benefits, ensuring the nominee receives the purchase price in case of the policyholder’s demise.

Conclusion

PMVVY is a risk-free investment option for senior citizens above the age of 60 years. The pension from this scheme is a regular source of income to support the financial needs of retired individuals. However, one must have sufficient liquid funds to invest in this scheme.

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