The much awaited pension scheme-Pradhan Mantri Vaya Vandana Yojana- for senior citizens aged 60 or above launched earlier this week. Prime Minister Narendra Modi had announced the scheme on New Year's eve exclusively for senior citizens.
The pension scheme is offered by Life Insurance Corporation of India (LIC). In this falling interest rate scenario, where banks are cutting their deposit rates and the interest rates on small saving schemes are at record low, experts believe it will provide senior citizens aged 60 or above an alternative to look at. Here is all you need to know about the scheme.
1. Under this scheme, there will be an assured return of 8 per cent over a tenure of 10 years. If there is a shortfall between the actual return earned under the scheme and the guaranteed return of 8 per cent then the government will subsidise LIC for it.
2. LIC started offering the pension scheme since May 4,2017 and it will remain open for the next one year.
3. One can invest in the pension scheme through both online and offline mode.
4. Under the scheme the investor will get the option to choose between the mode of payment - monthly, quarterly,half-yearly and yearly. There is a minimum and maximum limit on the investment amount depending on the mode of pension chosen. For example if a person choses to receive the minimum pension available under the scheme (Rs 1,000 per month), then he will have to invest Rs 1.5 lakh but if the person chooses to receive Rs 12,000 annually, then Rs 1,44,578 will have to be invested.
5. Premature withdrawal from the scheme is possible in case the money is required for the treatment of terminal or critical illness of the the person or spouse. In this case, 98 per cent of the amount invested will be refunded.
6. In case of the death of the pensioner during the policy term of 10 years, the purchase price will be refunded to the beneficiary.
7. On the maturity , the pensioner will get back the amount invested along with the final installment of the pension.
8. One can also avail a loan of up to 75 per cent of the amount invested after three years.
9. With interest rates moving down, this will be a good option. Since the scheme will be open for one year from the date of launch, it will advisable to wait and see during the year whether Reserve Bank of India cuts rates further or not and then decide to invest if interest rates move down further," said Manoj Nagpal, CEO, Outlook Asia Capital.
10. "Considering the interest rate are falling it may not be a bad idea for senior citizens, especially those who fall in the lower tax bracket. But as the interest income will be taxable, those who fall in the higher tax bracket can also look at options such as tax free bonds," said Anil Rego, CEO & Founder, Right Horizons.
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