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Senior citizens are feeling the brunt of declining interest rate most as they most depend on bank fixed deposits for regular income. But those who are looking for an alternative the Pradhan Mantri Vaya Vandana Yojana, a pension scheme, could be an option. It is currently offering an annual rate of 7.4% and considering the low rate of return of bank deposits, you can consider earning pension through the scheme. Here are details of Pradhan Mantri Vaya Vandana Yojana (PMVVY).
Pradhan Mantri Vaya Vandana Yojana is an immediate pension scheme, which pays out a pension at the assured rate of return. The policy is for the period of 10 years and the maximum you can invest Rs 15 lakh in the scheme. The frequency- monthly, quarterly, or yearly- of pension amount can be chosen at your convenience. Currently, it offers an assured return of 7.4% for 2020-21. The rate is reset every year at the start of the financial year so the rates are due for revision for this year. The scheme is offered through LIC 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.
How much pension you can earn?
| Mode of Pension | Min Purchase Price (Rs) | Minimum Pension (Rs) |
| Monthly | 162162 | 1000 |
| Quarterly | 161074 | 3000 |
| Half-yearly | 159574 | 6000 |
| Yearly | 156658 | 12000 |
| Mode of Pension | Max Purchase Price (Rs) | Max Pension (Rs) |
| Monthly | 1500000 | 9250 |
| Quarterly | 1489933 | 27750 |
| Half-yearly | 1476064 | 55500 |
| Yearly | 1449086 | 111000 |
As the table given above, if you invest Rs 1.62 lakh as lumpsum in Pradhan Mantri Vaya Vandana Yojana, the policy will offer you Rs 1,000 per month. For if opt for an annual pension of Rs 12,ooo you need to invest a little less at Rs 1,56,658 . Similarly, if you invest Rs 15 lakh, it offers a monthly pension of Rs 9250 and for an annual pension of Rs1,11,000 you need to invest a little less at Rs 14,49,086.
How to earn Rs 38,300 pension?
The policy pays you a monthly pension of Rs 74 and a yearly pension of Rs 76.60 for every Rs1,000 invested. Going by the rates if you deposit Rs 5 lakh in the scheme you will earn Rs 38,300 yearly pension which works out to Rs 3,083 per month.
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.
Benefits
On the death of the pensioner during the policy term of 10 years, the lump sum 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 the critical illness of a spouse. The surrender value is equal to 98% of the invested amount.
Loan
The loan can be taken from the policy after 3 years of completion, which will maximum of 75 % of the invested amount. For the loan sanctioned till April 30, 2021, the applicable interest rate is 9.5% p.a. for the entire term of the loan.
Money9 Take: With an interest rate of 7.4%, Pradhan Mantri Vaya Vandana Yojana is one of the best schemes for senior citizens. It gives you a chance to have an inflation-beating return when interest rates have declined over the year.