Great news for senior citizens! Govt extends this social security scheme; know assured returns for FY21

In a major relief to the senior citizens, the government of India will initially offer an assured return of 7.40 per cent per annum for the year 2020-21 on its Pradhan Mantri Vaya VandanaYojana (PMVVY), according to a government release. The rates will be reset every year, thereafter, the release said. The decision was taken by the Union Cabinet under the chairmanship of Prime Minister Narendra Modi. The cabinet has also given its approval for another extension of the scheme by three years up to 31 March 2023.

PMVVY is a social security scheme for senior citizens offered by the Life Insurance Corporation of India (LIC). It is intended to give an assured minimum pension to for 10 years based on an assured return on the purchase price/ subscription amount. It also offers a death benefit in the form of return of purchase price to the nominee. This policy was open for a short period and was later extended to 31 March 2020.

The government has delegated the authority to Finance Minister to approve annual reset rate of return at the beginning of every financial year, the release said.

The government has also approved the expenditure to be incurred on account of the difference between the market rate of return generated by LIC (net of expenses) and the guaranteed rate of return under the scheme.

Government's financial liability is limited to the extent of the difference between the market return generated by LIC and the guaranteed return of 7.40% per annum initially for the year 2020-21 and thereafter to be reset every year in line with SCSS, the release said.

The expenses on managing the scheme are capped at 0.5 per cent of assets under management per annum for the first year of the scheme and 0.3 per cent p.a. for second year onward for the next nine years, the release said.

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The minimum investment has also been revised to Rs 156,658 for pension of Rs 12,000 per annum and Rs 162,162 for getting a minimum pension amount of Rs.1000/- per month under the scheme.