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Varishtha Pension Bima Yojana – Pension Scheme for Senior Citizens

Finance minister on Thursday  on 14^th August, 2014 relaunched an insurance scheme for senior citizens that will provide monthly pension ranging from Rs 500 to Rs 5,000.  The revived scheme would be available between August 15, 2014 and August 14, 2015 for the benefit of citizens aged 60 years and above. It will provide financial security by ensuring regular income during their advancing years, a Finance Ministry statement said.

The scheme would be administered by LIC. “VPBY (Varishtha Pension Bima Yojana) will benefit the vulnerable section of society with limited resources as it will provide monthly pension ranging from Rs 500 to Rs 5,000 to senior citizens of the country,” Jaitley said.

The minimum investment (purchase price) for the scheme would be Rs 66,665 and the maximum is over Rs 6.66 lakh. The pension will start from next year of purchase of insurance.  The full purchase price will be refunded to the nominee in case of dealth of the insured.

Varishtha Pension Bima Yojana (VPBY), introduced earlier in 2003-04 by then NDA Government, covered 3.83 lakh senior citizens. LIC collected Rs 7,100 crore under the scheme.

“In case of VPBY, the beneficiary gets an income at the overall rate of 9.38 per cent per annum on their deposits as they are being paid on monthly basis,” Jaitley said.

“In this era of volatile interest rate, this scheme would provide senior citizens a fixed return for rest of their life,” he said.

The Scheme Details are given under

LIC of India has been given the sole privilege to operate this scheme.

During the lifetime of Pensioner, a pension in the form of immediate annuity as per mode chosen by the Pensioner shall be payable.

On death of the Pensioner the Purchase Price shall be refunded.

 i.      Minimum Entry Age:  60 years (completed)

 ii.      Maximum Entry Age:  No limit

a)     Minimum Pension:       Rs. 500/- per month

b)    Maximum Pension:      Rs. 5000/- per month

Ceiling of maximum pension is for a family as a whole i.e. total amount of pension under all the policies issued to a family under this plan shall not exceed the maximum pension limit. The family for this purpose will comprise of pensioner, his/her spouse and dependents.

Payment of Purchase Price: The plan can be purchased by payment of a lump sum Purchase Price. The pensioner has an option to choose either the amount of pension or the Purchase Price.

The minimum and maximum Purchase Price under different modes of pension will be as under:

The Purchase Price to be charged shall be rounded to nearest multiple of Rs.5/-.

Mode of pension payment:  The modes of pension payment are monthly, quarterly, half-yearly & yearly. The pension payment shall be through ECS/NEFT only.

The first installment of pension shall be paid after 1 year, 6 months, 3 months or 1 month from the date of purchase of the same depending on the mode of pension payment i.e. yearly, half-yearly, quarterly or monthly respectively.

The pension rates for Rs.1000/- Purchase Price for different modes of pension payments are as below:

                                                              i.      Yearly:            Rs. 93.8069 p.a.

                                                            ii.      Half-yearly:     Rs. 91.7045 p.a.

                                                          iii.      Quarterly:        Rs. 90.6767 p.a.

                                                          iv.      Monthly:         Rs. 90.0000 p.a.

The pension installment shall be rounded off to the nearest rupee.

These rates are not age specific.

Surrender Value: The policy can be surrendered after completion of 15 years. The Surrender Value payable will be refund of Purchase Price. However, under exceptional circumstances, if the pensioner requires money for the treatment of any critical/terminal illness of self or spouse then the policy can be surrendered before the completion of 15 years and the Surrender Value payable shall be 98% of Purchase Price.

 Loan: Loan facility is available after completion of 3 policy years. The maximum loan that can be granted shall be 75% of the Purchase Price.

The rate of interest to be charged for loan amount would be determined from time to time by the Corporation.

Loan interest will be recovered from pension amount payable under the policy. The Loan interest will accrue as per the frequency of pension payment under the policy and it will be due on the due date of pension. However, the loan outstanding shall be recovered from the claim proceeds at the time of exit.

Taxes: Taxes including Service Tax, if any, shall be as per the Tax laws and the rate of tax as applicable from time to time.

The amount of tax payable as per the prevailing rates shall be payable by the policyholder on Purchase Price. The amount of Tax paid shall not be considered for the calculation of benefits payable under the plan.

Free Look period: If a policyholder is not satisfied with the “Terms and Conditions of the policy, he/she may return the policy to the Corporation within 15 days from the date of receipt of the policy stating the reason of objections.

The amount to be refunded within free look period shall be the Purchase Price deposited by the policyholder after deducting the charges for Stamp duty.

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