The Cabinet has given its approval to Varishtha Pension Bima Yojana (VPBY), 2017. Life Insurance Corporation of India (LIC) will take in-charge of the scheme and aims to provide social security to senior citizens. It will give an assured pension, offering an 8% per annum guaranteed rate of return for 10 years, with an option for pension on a monthly, quarterly, half-yearly or annual basis.
The scheme offered annuities in monthly, quarterly, half-yearly and annual modes, varying, between Rs 500 and Rs 5,000 (monthly), Rs 1,500 and Rs 15,000 (quarterly), Rs 3,000 and Rs 30,000 (half-yearly) and Rs 6,000 and Rs 60,000 (annually). Maximum purchase price was Rs 6,66,665. The scheme offered an assured return of 9% on monthly payment basis, which amounted to annualized return of 9.38%.
Under the scheme, the difference between the effective yield paid to the pensioner, and that earned by LIC, is compensated as subsidy to LIC by the government. While the recently approved VPBY 2017 is providing a lesser return—8% per annum— given the current falling interest rate regime, experts believe that it is a good offering.
“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,” said Mukul G. Asher, professorial fellow, Lee Kuan Yew School of Public Policy, National University of Singapore.
