Critical review of Pradhan Mantri Vaya Vandana Yojana -LIC’s 8% Guaranteed Pension Plan

Let us see the features of this scheme.

Features and eligibility conditions of Pradhan Mantri Vaya Vandana Yojana

# Minimum Age at entry should be 60 Yrs of age.

# There is no maximum age limit set.

# The monthly pension will be 8%.

# The pension period or policy term is 10 Yrs.

# Minimum pension per month is Rs.1,000, quarterly is Rs.3,000, half yearly is Rs.6,000 and yearly is Rs.12,000.

# Maximum monthly pension in this plan is monthly Rs.5,000, quarterly Rs.15,000, half yearly Rs.30,000 and yearly Rs. 60,000.

# This plan will be available for sale from LIC of India.

# You can buy this plan from 4th May 2017 to 3rd May 2018. Therefore, this plan is a limited period pension plan.

# You can surrender this policy during the policy period under certain exceptional circumstances like pensioner requires money for treatment of any critical/terminal illness of self or spouse. Surrender value payable will be 98% of purchase price.

# You can avail the loan facility after completion of 3 policy years. The maximum loan payable will be 75% of purchase price. Interest on the loan will be recovered from the pension amount.

# If the pensioner suicide during the policy period, then his nominee or legal heirs will receive the full purchase price.

# The pension will be directly credited to your savings account using NEFT facility or Aadhaar Enabled Payment System.

How much can you invest in Pradhan Mantri Vaya Vandana Yojana?

This is an immediate pension plan. This means if you invest in this plan, your pension will start from the next month itself. Below is the chart of the minimum and maximum investment under this plan

Do remember that this ceiling of minimum and maximum pension is to the whole family. Here, the meaning of family means self, spouse, and dependents.

The benefits under this plan are as below.

# During policy period

The pensioner will receive the monthly, quarterly, half yearly or yearly pension as he has opted during the time of buying.

# Death Benefits

On the death of the pensioner during the policy term, the Purchase Price will be refunded to the nominee (or legal heirs in absence of nominee).

# Maturity Benefits

If the pensioner survives up to the end of the policy term, Purchase Price and final installment of the pension will be paid to the pensioner.

Review of Pradhan Mantri Vaya Vandana Yojana

As usual, only a few positives but includes many negatives. Let us see the review one by one.

1. No Tax Benefits-I may say this product as one more failure. Senior Citizens desperately looking for tax benefits while investing or tax relief when they receive the pension. However, in both terms, this product is a total failure.
2. Liquidity-As one grows older, uncertainties related health or other issues pop up. Hence, one must invest in a highly liquid product. However, in this case, liquidity is available in exceptional cases. Hence, it fails to understand the requirement of senior citizens.
3. Inflation– This plan will give you same equal monthly pension. But who will take care of raising inflation in terms of health issues or cost of living?
4. Maximum Ceiling-The maximum pension one can avail under this plan is Rs.5,000 a month and the maximum investable amount is Rs.7,50,000. This means that one can’t sustain by depending on this product itself. It is hard for an individual to survive with meager Rs.5,000 pension. It seems that a replication of Atal Pension Yojana. The only difference is, this is immediate annuity plan but APY is deferred annuity plan.
5. Returns-The only eye catching in this product is 8% guaranteed pension. But tax and inflation will eat this 8% return and at the end, you may have to survive with the negative real return. However, if one compare with FDs, then this product may be an eye catching.
6. You can go ahead IF-You can go ahead and invest in this plan IF you are not concerned about your taxation, inflation or not aware about other products like tax-free bonds or other debt products. Simple, straight forward, backed by Government and managed by LIC are the positives of this product.
7. No Age based purchase-Unlike Jeevan Akshay VI, which is also LIC’s immediate annuity plan, in this plan the purchase price is fixed. It is not dependent on your age.