Varishtha Pension Bima Yojana 2017 Wiki

Varishtha Pension Bima Yojana 2017 is a guaranteed pension scheme by the Government of India for senior citizens, aged 60 years and above. This wiki will provide details on the history, the features and advantages of the pension scheme.

What is VBPY 2017?

A Government of India subsidized scheme with an assured return of 8% per annum effective yield for monthly pension.

History of VPBY

  • First announced in July 2003 by the then BJP government (NDA) for people above 55 years.
  • Offered guaranteed annual return of 9% paid on monthly basis.
  • In 2004, the scheme was withdrawn.
  • In 2014-15 budget, Arun Jaitley re-announced this scheme with age limit increased to 60 years.
  • In 2017, Varishtha Pension Bima Yojana 2017 is launched with 8% interest rate.

According to Press Information Bureau, Government Of India: Government of India in the Union Budget 2014-2015, announced the revival of Varishtha Pension Bima Yojana (VPBY). The Union Finance Minister Shri Arun Jaitley said in his Budget Speech, “NDA Government during its last term in office had introduced the Varishtha Pension Bima Yojana (VPBY) as a pension scheme for senior citizens. Under the scheme, a total number of 3.16 lakh annuitants are being benefited and corpus amounts to Rs.6, 095 Crore. I propose to revive the scheme for a limited period from 15th August 2014 to 14th August 2015 for the benefit of citizens aged 60 years and above”.

Purpose of VPBY 2017

  • Purpose of VBPY 2017, is to provide immediate pension to senior citizens.
  • It is a part of Government’s commitment for financial inclusion and social security.
  • VBPY will protect against a future fall in their interest income due to uncertain market conditions.
  • This initiative is for the welfare and well-being of the senior citizens of the country especially given the increasing longevity in India, which has gone up substantially.
  • The subscription to the scheme would create a huge corpus which will help in resource mobilization for the development of the country.

Features of LIC Varishtha Pension Bima Yojana 2017

  • This scheme will be managed by Life Insurance Corporation of India (LIC).
  • The scheme will likely be launched on April 1st 2017.
  • The scheme is to remain open for subscription for one year from the date of launch.
  • Under the scheme senior citizens above the age of 60 will be offered pension (annuities) in monthly, quarterly, half-yearly and annual modes.
  • Fixed interest rate commitment is for 10 years only, after which rates will be revisited.
  • Being a central government pension plan, Varishtha Pension Bima Yojana is a risk-free plan (unless India as a nation defaults, which is unlikely)

Features of previous Varishtha Pension Bima Yojana

  • Return of 9% and annualized yield of 9.3%.
  • No medical check-ups required for LIC Varishtha Pension Bima Yojana.
  • Early availability of Surrender Value if the annuitant is diagnosed with any Critical or Terminal Illness.
  • Lock in period of 15 years.
  • Income tax benefit on the premium paid as per Section 80CCC of the Income Tax Act.

Lower Interest Rate of LIC VPBY 2017

Varishtha Pension Bima Yojana 2017 is offereing only 8% when real inflation is still quite high. Is 8% a good interest rate for retired senior citizens who have no other income source? Here is what experts have to say.

As per Mukul G. Asher, professorial fellow, Lee Kuan Yew School of Public Policy, National University of Singapore: “The purpose of VPBY 2017 is to help those citizens who rely on interest income from their retirement savings to cope with lower interest rate environment. The 8% interest is competitive given very low, even negative in some cases, interest rate environment globally.”

As per Manoj Nagpal, CEO, Outlook Asia Capital: “With interest rates moving down, this will be a good option. Since the scheme will be open for one year from the date of launch, it will advisable to wait and see during the year whether Reserve Bankof India cuts rates further or not and then decide to invest if interest rates move down further.”

As per Anil Rego, CEO & Founder, Right Horizons: “Considering the interest rate are falling it may not be a bad idea for senior citizens especially, those who fall in the lower tax bracket. But as the interest income will be taxable, those who fall in the higher tax bracket can also look at options such as tax free bonds.”

Press Release of the Government of India

“The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its post-facto approval for launching of Varishtha Pension Bima Yojana 2017 (VPBY 2017). It is a part of Government’s commitment for financial inclusion and social security.

The scheme will be implemented through Life Insurance Corporation of India (LIC) during the current financial year to provide social security during old age and protect elderly persons aged 60 years and above against a future fall in their interest income due to uncertain market conditions. The scheme will provide an assured pension based on a guaranteed rate of return of 8% per annum for ten years, with an option to opt for pension on a monthly / quarterly / halfyearly and annual basis. The differential return, i.e., the difference between the return generated by LIC and the assured return of 8% per annum would be borne by Government of India as subsidy on an annual basis.

VPBY-2017 is proposed to be open for subscription for a period of one year from the date of launch.”

Source

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A Few Last Words

Before making any investment decision, please contact your financial adviser. I have provided this article for educational purpose only.

I hope you found this article on LIC Varishtha Pension Bima Yojana 2017 Wiki. If you have something to add please leave a comment in the post. Please feel free to contact me.

Subhodeep Mukhopadhyay

I am a Management Consultant in the Education Sector. In my previous corporate career, I have worked in Banking, Private Equity and Software industry. I am an MBA in Finance/ Computer Engineer and enjoy doing equity research and financial analysis in my free time.

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