Varishtha Pension Bima Yojana is a senior citizen pension scheme initiated by the Government of India with administrative assistance from Life Insurance Corporation of India (LIC). Under this scheme, the subscribers receive annuity payouts until the maturity of the pension plan. VPBY was first announced in 2003-04 and later revived again in 2014 -15, followed by 2017.

The much-needed social security for senior citizens is promised with this scheme that ensures pension at 9% of the rate per year for 10 years with the period of pension return ranging from monthly to yearly. People above 60 years of age can subscribe to the plan.

In the first phase of its launch, VPBY sold over 3 lakhs of policies with more than six thousand crores accumulated in the Government exchequer.

Features of Varishtha Pension Bima Yojana

• The scheme offers an immediate annuity payment as soon as the first premium payment is paid.
• The premium term is a single premium only.
• One doesn’t need to get a medical check-up done as a prerequisite to avail the scheme.
• In the event of an annuitant being diagnosed with a terminal illness, the scheme offers the surrender value.
• If a subscriber withdraws the amount, he/she has to pay only 2% of the total withdrawn amount as exit load. In case of the entire amount withdrawn, the police-holder will get 98% of the whole amount in the account.
• The scheme offers the annuitants an option to receive payouts out of monthly, quarterly, semi-annually or yearly.
• The mode of the payments to the subscriber is ECS or NEFT to ensure a timely and hassle-free transaction.
• The lock period before the policy matures, is 15 years. A policyholder will get the purchase price with the one-time premium he/she paid after the lock period of 15 periods.
• A subscriber can also avail the loan facility over the policy. The maximum loanable amount shall be 75% of the total price of the policy.

Eligibility Criteria

One can enrol for the scheme starting at 60 till as long as one wishes to continue. No age is fixed for the policy maturity, and benefits are in the form of money back. One can have the policy extended after one’s death, and his/her spouse will be getting the benefits.

Benefits of the Scheme

• The police-holder will get the annuity based on his choice of frequency. The annuity payment will start as soon as the premium is paid.
• The maximum amount received per annum is ₹ 60,000.
• Under the scheme, a subscriber is guaranteed to receive regular incomes on his investment.
• The tax benefit is applicable under section 80CCC.
• No hassles concerning the amount received in the form of cheques or demand drafts as the money will be transferred to the subscriber’s account.
• A policy-holder can quickly join his policy with the other pension schemes as well for a stable regular income.
• The purchase price of the policy will be refunded to the nominee in case of the premature death of the pensioner.
• On an amount of ₹ 6.5 lakhs, a policyholder can either choose to receive ₹ 5000 per month or ₹ 60,000 per annum which is considerably higher than the interest rate offered by Fixed Deposits or Saving Accounts.

Application process and Furnishing of Documents

• The application form/proposal form can be obtained from the LIC office.
• The applicant must fill in the application form with an accurate medical history, residence proof and KYC documents.
• At the time of surrendering to the police, a policy-holder must present a discharge form, policy documents, documents and receipts of medical treatment, Age proof.

Key Points on an Annuity

• An annuity is a regular payment received by an investor or a subscriber of a scheme against the sums of money they had been paying for a period of time.
• They are a significant source of regular income, especially for senior citizens, to meet their daily expenses.
• An annuity is similar to a pension with the only difference of presenting a choice to receive it on different frequencies. For example, Varishtha Pension Bima Yojana provides an alternative to receive an annuity after every 1 month / 3 months / 6 months / 1 year.

FAQs

Question. What is the Varishtha Pension Bima Yojana (VPBY)?

Question. Who are the eligible beneficiaries for the Varishtha Pension Bima Yojana?

Question. What are the key features of the Varishtha Pension Bima Yojana?

Question. How does the Varishtha Pension Bima Yojana ensure the financial security of senior citizens?

Question. How can one apply for the Varishtha Pension Bima Yojana?

MCQs

1. Which of the following is the implementing agency for the Varishtha Pension Bima Yojana?

A) Ministry of Rural Development

B) Life Insurance Corporation of India (LIC)

C) Reserve Bank of India

D) National Insurance Company

2. What is the minimum age requirement to avail of the Varishtha Pension Bima Yojana?

A) 50 years

B) 60 years

C) 65 years

D) 70 years

3. What is the rate of return guaranteed under the Varishtha Pension Bima Yojana?

A) 5%

B) 6%

C) 8%

D) 10%

4. What type of life cover does the Varishtha Pension Bima Yojana provide?

A) Rs. 1 lakh

B) Rs. 2 lakh

C) Rs. 5 lakh

D) No life cover

5. Which of the following payment options is available under the Varishtha Pension Bima Yojana?

A) Lump sum payment only

B) Monthly payments only

C) Quarterly, half-yearly, or yearly payments

D) Only quarterly payments

GS Mains Questions and Model Answers

Q1: Discuss the significance of the Varishtha Pension Bima Yojana in providing financial security to senior citizens in India.

Answer: The Varishtha Pension Bima Yojana was introduced with the primary objective of providing a reliable source of income for senior citizens who may not have adequate financial support after retirement. With the growing elderly population in India, many senior citizens face financial difficulties due to the lack of pension schemes or insufficient savings. The scheme provides a guaranteed return of 8% per annum, which ensures a steady income stream for elderly individuals. This helps them meet their day-to-day expenses, medical costs, and provides financial independence, reducing their dependence on family members. The life insurance cover of Rs. 2 lakh for the nominee of the policyholder further adds to the scheme's attractiveness, providing financial security to the family in case of the policyholder's death. By ensuring a consistent income and minimizing financial uncertainty, the Varishtha Pension Bima Yojana plays a critical role in promoting the well-being and dignity of senior citizens in India.

Q2: Analyze the potential benefits and challenges of the Varishtha Pension Bima Yojana for the senior citizens of India.

Answer: The Varishtha Pension Bima Yojana offers significant benefits to senior citizens, primarily by providing them with financial security in their later years. The guaranteed return of 8% per annum, along with a choice of pension payment options, ensures that the elderly can manage their finances more effectively. The scheme’s inclusion of a life insurance cover for the nominee further enhances the sense of security, making it a comprehensive financial product for senior citizens.
However, there are some challenges to the effective implementation of the scheme. While the scheme is available to all citizens over 60, many senior citizens may not be aware of the benefits or the application process. Accessibility issues in rural areas and a lack of financial literacy could limit the scheme’s reach. Furthermore, the minimum age requirement of 60 years may exclude some individuals who are below this threshold but may still face financial difficulties. There is also the matter of inflation eroding the real value of pensions over time, which might reduce the long-term benefits of the scheme. To address these challenges, greater awareness campaigns, financial literacy programs, and more localized access points could improve the reach and impact of the scheme.

Q3: Evaluate the role of government-backed pension schemes like the Varishtha Pension Bima Yojana in India's social security framework.

Answer: Government-backed pension schemes, such as the Varishtha Pension Bima Yojana, play a crucial role in India’s social security framework, especially considering the country’s large elderly population. With many citizens lacking private pension plans or sufficient savings, government schemes like VPBY provide a safety net for senior citizens, ensuring they have a steady income in their later years. These schemes reduce the burden on families and the state by ensuring that the elderly can maintain a basic standard of living.
The role of such schemes becomes even more important in the context of India’s demographic shift, where the proportion of senior citizens is expected to rise significantly in the coming decades. While India has made strides in enhancing social welfare programs, gaps in coverage, particularly in rural and underprivileged areas, still remain. Schemes like VPBY complement other social welfare initiatives like the National Social Assistance Programme (NSAP) and the Pradhan Mantri Shram Yogi Mandhan, which offer pension benefits to different sections of society. By improving financial security for senior citizens, these government-backed schemes contribute to the overall health and stability of India’s social security system.

Previous Year Questions on Varishtha Pension Bima Yojana

1. UPSC CSE 2021

Question: "What is the purpose of the Varishtha Pension Bima Yojana, and who implements it?"

Answer: The purpose of the Varishtha Pension Bima Yojana is to provide financial security to senior citizens by offering them a guaranteed monthly pension. It is implemented by the Life Insurance Corporation of India (LIC).

2. UPSC CSE 2020

Question: "Assess the role of government pension schemes like the Varishtha Pension Bima Yojana in enhancing social security for the elderly in India."

Answer: Government pension schemes, such as the Varishtha Pension Bima Yojana, play a critical role in enhancing social security for the elderly by ensuring a steady income stream, reducing financial dependence on families, and offering life insurance cover for the nominee. These schemes help address the financial challenges faced by senior citizens, particularly those without adequate retirement savings.