The Varishtha Pension Bima Yojana 2017, a pension scheme for senior citizens, was approved by the Union Cabinet on Tuesday in a meeting chaired by the Prime Minister Narendra Modi. The government's plans for launching of such a scheme that provides guaranteed interest rate to senior citizens was announced by PM Modi in his address to the nation on the eve of New Year. With banks being flush in deposits in the wake of demonetisation and the credit offtake remaining weak, many of them have cut interest rate on bank deposits, hurting the income of those who depend on interest income. "Banks often reduce their deposit rates, when they receive a large volume of money. This should not adversely impact senior citizens," PM Modi had said in his address to the nation.
Here are 10 things to know about Varishtha Pension Bima Yojana 2017
1) Varishtha Pension Bima Yojana 2017 will be implemented through Life Insurance Corporation of India (LIC) during the current financial year.
2) It is aimed at providing income security to elderly persons aged 60 years and above against a future fall in their interest income due to uncertain market conditions.
3) Varishtha Pension Bima Yojana 2017 will provide an assured pension based on a guaranteed rate of return of 8 per cent for 10 years.
4) Senior citizens can opt for pension on a monthly/quarterly/half-yearly or annual basis under the Varishtha Pension Bima Yojana 2017.
5) The government will pay to LIC the differential return, which is the difference between the return generated by the insurer and the assured return of 8 per cent per cent, as subsidy on an annual basis.
6) Varishtha Pension Bima Yojana 2017 will be open for subscription for a period of one year from the date of launch.
7) The government's statement on Varishtha Pension Bima Yojana 2017 does not mention the maximum amount that can be invested under the scheme.
8) However, PM Modi in his New Year Eve's address had said that up to Rs 7.5 lakh could be invested in such a scheme. Financial planners are awaiting more details on the Varishtha Pension Bima Yojana 2017.
9) Financial planners say that with interest rate poised for further cuts in the future, the 8 per cent Varishtha Pension Bima Yojana qualifies as a good investment option for senior citizens, though some details on pre-mature withdrawal options are yet to be released. The State Bank of India or SBI currently pays 7 per cent interest rate to senior citizens on fixed deposits with maturity between 5 to 10 years. Senior Citizen Savings Scheme, which is a small savings scheme for seniors of five years, currently offers 8.5 per cent interest and the maximum cannot that can be invested is Rs 15 lakh. But overall interest rate regime heading lower, the interest rate on Senior Citizen Savings Scheme is also poised for further fall in the future.
10) Since Varishtha Pension Bima Yojana is a pension plan from the central government, the investment carries very little risk.
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