Pradhan Mantri Vaya Vandana Yojana(PMVVY) is a pension scheme for elderly citizens above the age of 60 years or above, which provides a guaranteed pension for a span of 10 years. Due to the unstable market conditions and a matter of social security, a simplified scheme of assured pension of 8% was launched, which has been implemented through Life Insurance Corporation (LIC) of India.

PMVVY, which had earlier been closed on March 31, 2020, due to the pandemic situation, was recently extended by the government for another three financial years till March of 2023.

PMVVY: Key Points

• Pradhan Mantri Vaya Vandana Yojana is a pension scheme that ensures monthly pension payouts to senior citizens for the period of its term of 10 years.
• An investor is at the liberty of opting for the pension amount he/she wants or for the purchase price one wants to invest in.
• Launched in 2017 by the Ministry of Finance, the scheme was opened for enrolment till 31st March 2020.
• The scheme has recently been given the nod again by the Finance Ministry and would remain in effect till March 2023.
• Initial rate of return for the year 2020-21 has been fixed at 7.40%. The return will keep getting reset every year with respect to the Senior Citizen Saving Scheme (SCSS)
• One can buy the scheme offline as well as online.
• The minimum pension amount to be Rs. 1000.
• The maximum pension amount to be Rs. 9,250 per month
• In the event of subscriber’s demise, the purchase price will be refunded to the nominee.
• The Life Insurance Corporation of India (LIC) is the exclusive and sole provider of this scheme.

Features of PMVVY

• The amount of the maximum investment has been fixed at Rs. 15 Lakh per senior citizen.
• The maximum monthly income in the form of pension that can be received is Rs. 9,250. For example, if a couple is a policy-holder of PMVVY, having invested 15 Lakh each, the maximum monthly pension collectively will be Rs. 18, 500 for the investment of Rs. 30 Lakh.
• A policy-holder can also take 75% of the purchase price as a loan, only after the completion of 3 policy years.
• The returns have been exempted from GST (Goods and Services Tax).

Eligibility Criteria

An applicant must :

• Be an Indian Citizen.
• Be 60 years or above.
• Have an Adhar Card

Mode of Pension Payment

• A subscriber can opt for monthly/quarterly/half-yearly/yearly for the mode of pension payment, i.e., the amount of the pension will be made after any of the time as mentioned earlier periods, starting from the date of purchase of the scheme.
• NEFT or Adhar-enabled payment systems will be employed to process the payments.
• An individual interested in purchasing the scheme can either go to the LIC local office or log on to the official web site for LIC, i.e., www.licindia.in

About the Beneficiaries

• The policy-holder will be paid the purchase price of the annuity and the final instalment if he/she survives at the end of the policy term of 10 years.
• If the actual beneficiary dies before the 10 years of policy term, his / her spouse will be the nominee and entitled to the purchase price of the annuity.

New Rules for PMVVY

• As the scheme was recently given a nod again by the Finance Ministry to be effective till March 2023, following new rules, have been introduced.
• The interest rate on the investment has been minimised. Now, the rate of interest will be varied as per the financial year.
• The interest rate of 7.4 per cent has been fixed for the financial year 2020-21, which calculates to 7.66 per cent on an annual basis for the entire period of 10 years. The interest rate for the next two years will be declared at the start of the financial year.

FAQs

MCQs

1. What is the maximum investment limit under the Pradhan Mantri Vaya Vandana Yojana?

A) Rs. 10,00,000

B) Rs. 14,93,368

C) Rs. 5,00,000

D) Rs. 20,00,000

2. Who is eligible for the PMVVY scheme?

A) All citizens of India

B) Senior citizens above the age of 60 years

C) Only women above the age of 60

D) Farmers

3. What is the tenure of the PMVVY scheme?

A) 15 years

B) 5 years

C) 10 years

D) 20 years

4. How does the PMVVY scheme benefit senior citizens?

A) By providing a lump sum payout

B) By ensuring a regular pension

C) By covering medical expenses

D) By offering tax benefits

5. What is the minimum pension that can be availed under PMVVY?

A) Rs. 500

B) Rs. 1,000

C) Rs. 2,000

D) Rs. 3,000

GS Mains Questions and Model Answers

Q1: Evaluate the significance of pension schemes like PMVVY for the elderly population in India.

Answer: Pension schemes such as PMVVY are crucial for India's elderly population as they provide financial security and alleviate the dependency on others during retirement. With increasing life expectancy and the breakdown of traditional family support systems, these schemes become vital in ensuring senior citizens can live with dignity. PMVVY is especially significant in a country where a substantial portion of the elderly does not have adequate savings or assets. By offering a guaranteed regular income, the scheme addresses issues of financial instability, helping elderly citizens meet their daily expenses and medical needs. Moreover, the scheme promotes self-reliance and economic independence among senior citizens, reducing their vulnerability to poverty and exploitation. However, challenges such as inflation and rising healthcare costs need to be addressed to ensure that such schemes remain effective in the long term.

Q2: Discuss the impact of the Pradhan Mantri Vaya Vandana Yojana on India’s social security system.

Answer: The Pradhan Mantri Vaya Vandana Yojana plays a crucial role in strengthening India's social security system by providing a safety net for senior citizens. With an increasing elderly population, India faces the challenge of ensuring that older individuals remain financially secure and do not fall into poverty. PMVVY contributes significantly to this goal by offering a fixed return and regular pension to senior citizens. The scheme provides an avenue for elderly individuals to invest in a reliable financial product that guarantees a regular income, thus improving their quality of life. While the scheme is beneficial, its scope can be expanded by incorporating higher returns that account for inflation, and also integrating other welfare measures such as health insurance for senior citizens. In this way, PMVVY can become a comprehensive tool for addressing the needs of the elderly population in India.

Q3: Analyze the role of government schemes like PMVVY in promoting financial inclusion in India.

Answer: Government schemes like PMVVY play a pivotal role in promoting financial inclusion by providing access to formal financial services for vulnerable segments of the population, such as the elderly. PMVVY offers senior citizens an opportunity to invest in a government-backed pension scheme, ensuring that they are not excluded from the financial system. By targeting senior citizens, many of whom may not have access to other forms of pension or savings schemes, the initiative ensures that this group is financially included and protected against economic shocks. The scheme also encourages financial literacy and awareness among senior citizens, helping them understand the importance of securing their future. Through initiatives like PMVVY, the government aims to create a more inclusive financial ecosystem, where even the most marginalized individuals can access financial products tailored to their needs.

Previous Year Questions on PMVVY

1. UPSC CSE 2020:

Question: Discuss the impact of social security schemes like PMVVY on poverty reduction in India.

Answer: Social security schemes like PMVVY significantly contribute to poverty reduction by providing financial stability to senior citizens. By offering a regular pension, PMVVY ensures that elderly individuals do not face economic hardships after retirement, particularly those who lack sufficient savings. This regular income helps in meeting daily needs, thereby reducing their vulnerability to poverty and enhancing their overall standard of living.

2. UPSC CSE 2019:

Question: How does the Pradhan Mantri Vaya Vandana Yojana support the objectives of financial inclusion?

Answer: The PMVVY scheme supports financial inclusion by offering a financial product that is accessible to senior citizens, a demographic that is often excluded from the mainstream financial system. The scheme ensures that elderly individuals have access to a steady income post-retirement, promoting economic independence and financial stability.