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Prime min­is­ter’s pen­sion plan for se­nior cit­i­zens

Consumer Voice - - Contents -

Of­fi­cially called Prad­han Mantri Vaya Van­dana Yo­jana (PMVVY), this is the lat­est ad­di­tion to a host of schemes named af­ter the prime min­is­ter of In­dia. A govern­ment-sub­sidised pen­sion scheme, it has been con­ceived with the spe­cific pur­pose of ad­dress­ing the long-stand­ing con­cerns of se­nior cit­i­zens (var­isht na­garik) with re­gard to a pen­sion plan where their sav­ings are pro­tected and min­i­mum re­turns are guar­an­teed. PMVVY may just be the an­swer to a la­tent de­mand for an al­ter­nate, vi­able pen­sion plan – one where se­nior cit­i­zens feel safe and se­cure in the knowl­edge that their sav­ings are not eroded by mar­ket forces.

The plan (No. 842, unique iden­ti­fi­ca­tion num­ber [UIN] 512G311V01) is avail­able for one year, from 4 May 2017 to 3 May 2018. It is open for sale to In­dian cit­i­zens who are 60 years or more of age.

Let's take a long look at the salient fea­tures:

• Sale is through Life In­sur­ance Cor­po­ra­tion of In­dia of­fices/branches.

• There is no max­i­mum age limit for en­try.

• The pen­sion pe­riod or pol­icy term is 10 years.

• The pen­sion will be payable to the pen­sioner

sur­viv­ing dur­ing the pol­icy term of 10 years.

• The plan pro­vides for as­sured pen­sion re­turns of 8 per cent per an­num (8.30 per cent an­nu­alised).

• The min­i­mum pur­chase price for en­ter­ing this plan is Rs 144,578 (one time) for re­ceiv­ing pen­sion on

a reg­u­lar ba­sis. The max­i­mum pur­chase price is Rs 722,892 (one time).

• The min­i­mum pen­sion amount payable will be Rs 12,000 (Rs 11,999.97 to be ex­act) an­nu­ally. The max­i­mum amount will be Rs 60,000 (Rs 57,831.36 to be ex­act) an­nu­ally.

• As of now, no in­come tax ben­e­fit is of­fered for this plan.

• Sur­ren­der value ben­e­fit is avail­able. You can sur­ren­der this pol­icy dur­ing the pol­icy pe­riod un­der cer­tain ex­cep­tional cir­cum­stances (for ex­am­ple, if you re­quire money for treat­ment of a crit­i­cal/ter­mi­nal ill­ness of self or spouse). Sur­ren­der value payable will be 98 per cent of pur­chase price.

• As­sign­ment fa­cil­ity is avail­able only against LIC for ob­tain­ing a loan.

• Loan fa­cil­ity is avail­able on this plan af­ter com­ple­tion of three years’ term and the same will be re­stricted to 75 per cent of the pur­chase price. Loan in­ter­est will be re­cov­ered from pen­sion amount payable un­der the pol­icy.

• A ‘free look’ pe­riod of 15 days is avail­able from the date of re­ceipt of pol­icy bond, if pol­i­cy­holder is not sat­is­fied with the terms and con­di­tions’ of the pol­icy. For on­line pur­chase, the free-look pe­riod is of 30 days.

Pen­sion Ben­e­fit

On sur­vival of the pen­sioner dur­ing the pol­icy term, pen­sion in ar­rears shall be payable to him/her de­pend­ing on the cho­sen mode of pen­sion pay­ment. The pen­sioner has the op­tion to choose ei­ther the amount of pen­sion or the pur­chase price.

Death Ben­e­fit

On death of pen­sioner dur­ing the pol­icy term, the pur­chase price shall be re­funded to the nom­i­nee/le­gal heir.

Ma­tu­rity Ben­e­fit

On sur­vival of pen­sioner till the end of the pol­icy term, pur­chase price and the fi­nal pen­sion in­stal­ment shall be payable.

What You May Be Wary of

• The amount is locked in for 10 years; so it may not be avail­able if re­quired ur­gently (other than in case of ill­ness).

• The pen­sion is not ad­justed to in­fla­tion. The pur­chas­ing power of, say, Rs 6,000 may re­duce to half in 10 years.

• There are no tax ben­e­fits on the pen­sion you re­ceive.

Thus, while PMVVY is a sim­ple and safe prod­uct of­fer­ing as­sured re­turns, and is backed by the govern­ment, one may want to look at other in­vest­ments that of­fer higher re­turns, af­ter do­ing due dili­gence.

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