Features of Varishtha Pension Bima Yojana 2017
The Varishtha Pension Bima Yojana 2017 will be implemented through Life Insurance Corporation of India (LIC) in the current financial year. The formal launch date of the scheme has not been announced yet. A government statement said it will be open for subscription for a period of one year from the date of launch.
The Varishtha Pension Bima Yojana 2017 is aimed at providing income security to persons aged 60 years and above against a future fall in their interest income due to uncertain market conditions. It will provide an assured pension based on a guaranteed rate of return of 8 per cent for 10 years. Senior citizens can opt for pension on a monthly/quarterly/half-yearly or annual basis under the Varishtha Pension Bima Yojana 2017.
The government's statement on Varishtha Pension Bima Yojana 2017 does not mention the maximum amount that can be invested under the scheme. However, PM Modi had in his New Year Eve's address 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.
How the Varishtha Pension Bima Yojana 2017 works
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, as subsidy on an annual basis.
Varishtha Pension Bima Yojana 2017 vs Senior Citizen Savings Scheme
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. State Bank of India or SBI, the country's largest lender, currently pays an interest rate of 7 per cent to senior citizens on fixed deposits with maturity between 5 year and 10 years.
On the other hand, the 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 with the overall interest rate regime heading lower, the interest rate on Senior Citizen Savings Scheme is also poised for a further fall in the future.
"Senior Citizen Savings Scheme is slightly better at 8.5 per cent and has a higher limit of Rs. 15 lakh investment with better liquidity. Hence the first preference for the investor should be Senior Citizen Savings Scheme. But we expect that Senior Citizen Savings Scheme interest rates will get reduced next quarter and hence first senior citizens should invest in that and any further surplus in Varishtha Pension Bima Yojana 2017," said Manoj Nagpal, CEO of Outlook Asia Capital.
However, the maturity period of Senior Citizen Savings Scheme is five years. Premature closure is allowed in the Senior Citizen Savings Scheme after one year on deduction of an amount equal to 1.5 per cent of the deposit, and after two years, 1 per cent of the deposit.
Outlook Asia Capital estimates that collections under Varishtha Pension Bima Yojana 2017 could be in the range of Rs. 10,000 crore.
The first Varishtha Pension Bima Yojana, meant for senior citizens aged 55 years and above, was launched on July 2003 and withdrawn on August 2004. Under the scheme, the pensioner gets an effective yield of 9 per cent per annum on the investment. It was later launched and was open from August, 2014 to August, 2015
The Varishtha Pension Bima Yojana 2017 will be implemented through Life Insurance Corporation of India (LIC) in the current financial year. The formal launch date of the scheme has not been announced yet. A government statement said it will be open for subscription for a period of one year from the date of launch.
The Varishtha Pension Bima Yojana 2017 is aimed at providing income security to persons aged 60 years and above against a future fall in their interest income due to uncertain market conditions. It will provide an assured pension based on a guaranteed rate of return of 8 per cent for 10 years. Senior citizens can opt for pension on a monthly/quarterly/half-yearly or annual basis under the Varishtha Pension Bima Yojana 2017.
The government's statement on Varishtha Pension Bima Yojana 2017 does not mention the maximum amount that can be invested under the scheme. However, PM Modi had in his New Year Eve's address 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.
How the Varishtha Pension Bima Yojana 2017 works
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, as subsidy on an annual basis.
Varishtha Pension Bima Yojana 2017 vs Senior Citizen Savings Scheme
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. State Bank of India or SBI, the country's largest lender, currently pays an interest rate of 7 per cent to senior citizens on fixed deposits with maturity between 5 year and 10 years.
On the other hand, the 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 with the overall interest rate regime heading lower, the interest rate on Senior Citizen Savings Scheme is also poised for a further fall in the future.
"Senior Citizen Savings Scheme is slightly better at 8.5 per cent and has a higher limit of Rs. 15 lakh investment with better liquidity. Hence the first preference for the investor should be Senior Citizen Savings Scheme. But we expect that Senior Citizen Savings Scheme interest rates will get reduced next quarter and hence first senior citizens should invest in that and any further surplus in Varishtha Pension Bima Yojana 2017," said Manoj Nagpal, CEO of Outlook Asia Capital.
However, the maturity period of Senior Citizen Savings Scheme is five years. Premature closure is allowed in the Senior Citizen Savings Scheme after one year on deduction of an amount equal to 1.5 per cent of the deposit, and after two years, 1 per cent of the deposit.
Outlook Asia Capital estimates that collections under Varishtha Pension Bima Yojana 2017 could be in the range of Rs. 10,000 crore.
The first Varishtha Pension Bima Yojana, meant for senior citizens aged 55 years and above, was launched on July 2003 and withdrawn on August 2004. Under the scheme, the pensioner gets an effective yield of 9 per cent per annum on the investment. It was later launched and was open from August, 2014 to August, 2015
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