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Interest income from bank fixed deposits is one of the sources for regular income, especially senior citizens. But now rates being low at around 5% many senior citizens are feeling the brunt. For those who are looking for an alternative the Pradhan Mantri Vaya Vandana Yojana, a pension scheme, can be an excellent option. Considering the high rate of interest it is offering when banks are cutting their deposit rates are at record low, assured return from the scheme can give the much needed cushion to senior citizens.
What is Pradhan Mantri Vaya Vandana Yojana?
It is a retirement scheme, which pays out pension at the assured rate of return. The policy is for the period of 10 years and the existing limit on investment is Rs 15 lakh. The frequency- monthly, quarterly, or yearly- of pension amount can be chosen as per your convenience.
LIC has been offering this pension scheme since May 4, 2017, it has now been extended further till March 31 2023. If there is a shortfall between the actual return earned under the scheme and the guaranteed return then the plan is subsidised by the government .
Eligibility
The scheme is designed specifically for senior citizens, who are above the age of 60 years. You can invest in the pension scheme through both online and offline mode.
Interest
Pradhan Mantri Vaya Vandana Yojana, currently offers an assured return of 7.4% for 2020-21. The rate is reset every year at the start of the financial year. On the minimum investment of Rs 1.62 lakh it offers a monthly pension of Rs 1,000. Similarly, on the maximum purchase price of Rs 15 lakh it offers a monthly pension of Rs 9250.
Benefits
On death of the pensioner during the policy term of 10 years, the lumpsum amount invested in the beginning (purchase price) is refunded to the beneficiary. On survival of the pensioner to the end of the policy term of 10 years, purchase price along with final pension gets payable.
Surrender Value
The policy allows surrender only during exceptional cases such as critical illness of a spouse. The surrender value is equal to 98% of the invested amount.
Loan
Loan can be taken from the policy after 3 years of completion, which will maximum 75 % of the invested amount. For the loan sanctioned till 30th April, 2021, the applicable interest rate is 9.5% p.a. for the entire term of the loan.
Money9 Take: With interest rate of 7.4%, Pradhan Mantri Vaya Vandana Yojana is one of the best schemes for senior citizens to earn regular income.