Varishta Pension Bima Yojana For Senior Citizens: Eligibility, Benefits & Other Details

Most senior citizens depend on their pension as a reliable source of income after retirement. Apart from their regular monthly pensions, senior citizens can also look at annuities as a way of ensuring a guaranteed source of income.

Similarly, the Government of India came up with a pension scheme in 2014-15 and again in the union budget of 2017-18. This scheme offers assured pension at guaranteed interest rates for senior citizens.

Known as the Varishtha Pension Bima Yojana, this pension scheme offers income security as well as a guaranteed rate of return. It provides annuity payouts for senior citizens in the form of an Immediate Annuity Plan.

What are annuities?

Annuities are investment plans that offer regular payment in return of a lump sum investment. These annuities help provide a steady form of income in retirement.

Different types of annuities

• Immediate Annuities: Here, you can purchase the annuity plan with a lump sum amount for a limited tenure or for lifetime. Once you make this investment, your annuity payment starts immediately.
• Deferred Annuities: In this case, your annuity payment starts after a certain date. This is further divided into Accumulation Phase and Vesting Phase.

So, now that we know about how annuities work, let’s understand the Varishtha Penision Bima Yojana along with its Eligibility, Benefits and other details.

• History

Previously launched in July 2003, the Varishtha Pension Bima Yojana was introduced to offer pension cover to senior citizens above the age of 55. During this period, it was widely received by senior citizens as it sold over 3.16 lakh policies, amounting to around ₹ 6,095 crore.

Having been withdrawn a year later, the scheme was re-launched twice – first during the 2014-15 budget and later again in 2017-18 – both times by the then Finance Minister of India, Mr. Arun Jaitley.

• Re-launch of LIC Varishtha Pension Bima Yojana

In Jan 2017, the Union Cabinet, chaired by Prime Minister Narendra Modi approved this pension scheme. Designed to provide social security for senior citizens, this scheme is implemented through Life Insurance Corporation of India.

• How does the LIC Varishtha Pension Bima Yojana work?

It is a single premium policy. This means that you need to pay the premium of your choice at the beginning of the policy. Once this premium is paid, you are eligible for a regular pension.

The Varishtha Pension Bima Yojana offers an assured pension based on a guaranteed rate of return of 8% per annum, for a period of 10 years. Here, you can opt for the pension on monthly, quarterly, half-yearly or annual basis.

• What is the Eligibility for LIC Varishtha Pension Bima Yojana?

The Varishtha Pension Yojana is available for citizens aged 60 years and above. There is no limit on the maximum age for this pension.

• Documents Required for the LIC Varishtha Pension Bima Yojana

You need to fill up an “Application Form” and submit the required documents along with it such as:

• Accurate medical history
• Address proof
• KYC related documents

Important features of the LIC Varishtha Pension Bima Yojana

As stated earlier, this is an immediate annuity plan. So, you will receive the annuity immediately after premium payment, according to your chosen frequency of annuity payout.

Speaking of which…

• What are the available modes of payout?

The LIC Varishtha Pension Bima Yojana offers 4 different modes of payout:

1. Monthly – Here, you will receive a certain annuity amount per month. The minimum premium payment for monthly payout is ₹ 66,665, while the maximum premium payment is ₹ 6,66,665.
2. Quarterly – Under this mode of payout, you will receive annuity amount every three months or 4 times a year.
3. Semi-annually - You will receive annuity on a semi-annual basis i.e. once every six months.
4. Yearly – Under the yearly mode, you will receive an annuity amount once a year. This will be a large sum as compared to the other modes of payout.

The below table shows the minimum and maximum premium payment for each mode of payout.

Also, as we know, the policy offers pension based on your investment/premium payment.

So, here is a table that shows the Varishtha Pension Bima Yojana maximum amount and minimum amount that you are eligible to receive, according to your pension period.

• Benefits of Varishtha Pension Bima Yojana

Since, it is an initiative by the Government of India, the LIC Varishtha Pension Bima Yojana it offers a wide range of perks and benefits for senior citizens.

Here are a few of the benefits offered by the Varishtha Pension Yojana:

• All payments under this policy are made by NEFT or ECS. So, you do not have to worry about encashing a cheque or receiving a demand draft.
• It offers assured pension with a guaranteed interest rate of 8% per annum, which is higher than most of the other senior citizen pension schemes.
• You can opt for receiving the pension amount through different payout modes i.e. monthly, quarterly, semi-yearly or yearly.
• It offers a free-look period of 15 days from the date of receipt of the policy. So, in case you wish to withdraw from the scheme, your premium amount will be refunded (after deduction of stamp duty charges).
• The LIC Varishtha Pension Bima Yojana offers death benefits too. Here, if the policyholder dies, then the premium payment will be refunded to the spouse/nominee.

• Available Loans

You can take a loan against the LIC Varishtha Pension Bima Yojana after a period of 3 years. The amount of loan offered will be up to 75% of the policy amount.

During the tenure of this loan, the policy will be assigned to LIC. The interest rates might vary and will be based on the rates decided by LIC itself.

• Tax Benefits on LIC Varishtha Pension Bima Yojana

Just like other policy schemes, this Varishtha Bima Yojana offers benefits on income tax as well. The premiums paid under this policy are tax exempted under Section 80C of the Income Tax Act.

This means that you do not have to pay any tax on the premium payment. These tax benefits along with the assured pension help you plan your savings better in a way. However, the pension amount that you receive will be taxable.

• Policy Surrender

In case of any critical illness, you can surrender this policy within 15 years of opening. Here, you will receive up to 98% of the single premium paid. If you surrender the policy after completion of 15 years, then you can get up to 100% returns on the single premium paid.

The LIC Varishtha Pension Bima Yojana is an important part of the government’s financial inclusion programme. It is designed to social and financial security for senior citizens in the form of assured pensions.