Finance Minister Arun Jaitley on Friday formally launched a pension scheme for senior citizens with an assured return rate of eight per cent, favouring efficiency with social security.
“Banks have to lend at feasible rates, while senior citizens want secure, reasonable, unfluctuating return on their investment,” Jaitley said here launching the pension scheme — Pradhan Mantri Vaya Vandana Yojana (PMVVY).
The PMVVY is a pension scheme announced by the government exclusively for the senior citizens aged 60 years and above, which is open for subscription between May 4, 2017 and May 3, 2018.
It provides an assured return of eight per cent per annum payable monthly (equivalent to 8.30 per cent per annum effectively) for 10 years.
“We have to maintain a critical balance between efficiency and social security,” Jaitley said.
The scheme can be purchased offline as well as online through the Life Insurance Corporation (LIC), which has been given the sole privilege to operate this scheme.
“Since the launch of scheme on May 4, it has already been subscribed 58,152 times so far and Rs 2,705.04 crore premium has also been collected,” the LIC said.
Under the scheme, the pension returns are payable at the end of each period, during the policy term of 10 years. The frequency of payment can be monthly/ quarterly/ half-yearly/ yearly, as opted for by the subscriber.
The scheme is exempt from the Goods and Services Tax (GST).
On survival of the pensioner till the end of the policy term of 10 years, purchase price along with final pension instalment shall be payable.
Loan up to 75% of the subscription amount shall be allowed after three policy years (to meet the liquidity needs). Loan interest shall be recovered from the pension instalments and the principal from the claim proceeds.
The scheme also allows for premature exit for the treatment of any critical/ terminal illness of self or spouse. On such premature exit, 98% of the subscription amount shall be refunded.
On death of the pensioner during the policy term of 10 years, the subscription amount shall be paid to the beneficiary.
The ceiling of maximum pension is for a family as a whole, wherein the family will comprise pensioner, his/her spouse and dependants.
The shortfall owing to the difference between the interest guaranteed and the actual interest earned and the expenses relating to administration shall be subsidised by the government and reimbursed to the LIC.