The government has recently approved raising the investment limit under the Pradhan Mantri Vaya Vandana Yojana (PMVVY) to Rs 15 lakh from Rs 7.5 lakh. It has also extended the last date for subscription till March 2020. The scheme was earlier supposed to end on May 4 this year.

The scheme, meant for senior citizens (aged 60 years and above), is a single premium payment pension plan offered by Life Insurance Corporation of India (LIC). The PMVVY provides senior citizens more avenues to earn a steady income at a time when fixed deposit rates are low.

The scheme, which was launched in May 2017, offers a guaranteed interest rate of 8 per cent per annum payable monthly (equivalent to 8.30 per cent per annum) for 10 years. The pension is payable at the end of each period during the policy term, in line with the frequency of payment (monthly/ quarterly/ half-yearly/ yearly mode) chosen by the pensioner at the time of purchase. In the monthly mode, an investor in PMVVY would get a monthly interest rate of Rs 10,000 if he or she invests Rs 15 lakh.

At the end of the policy term, in this case 10 years, the pensioner gets back the purchase price i.e. amount invested to earn pension. On death of the pensioner during the policy term, the purchase price will be paid to the nominee.

At present, a loan of up to 75 per cent of purchase price (amount invested to earn pension) is allowed after three policy years, to meet liquidity needs. The scheme also allows for premature exit for treatment of any critical/ terminal illness to the investor or spouse. On such premature exit, 98 per cent of the purchase price will be refunded.

This government sponsored socially-oriented insurance scheme is available online as well as offline. Also, this plan is exempt from goods and service tax.

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