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Varishtha Pension Bima Yojana (VPBY)
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Jul 2023

The Varishtha Pension Bima Yojana (VPBY) was created as a pension program for senior persons. It aims to provide financial security and a regular income to senior citizens during their retirement years. The scheme specifically targets individuals aged 60 years and above, offering them a range of benefits. One of the key advantages of VPBY is the provision of a guaranteed pension. Policyholders receive a fixed amount of pension on a monthly, quarterly, half-yearly, or annual basis, ensuring a steady income stream throughout their retirement. This regular pension helps senior citizens meet their financial needs and maintain a certain standard of living. The scheme also offers an attractive interest rate, which remains fixed for the entire policy duration. The interest rate provided by VPBY is generally higher than what other financial instruments offer to senior citizens, making it an appealing option for retirement planning. Another significant benefit of VPBY is the limited investment required. The scheme allows individuals to invest a lump sum amount from their retirement savings, up to a maximum investment limit. This feature enables senior citizens to allocate their funds wisely and receive regular pension payments as a result. Additionally, VPBY aims to minimize investment risk for senior citizens. As the scheme is backed by the Government of India, it provides a sense of security and stability to policyholders. The assurance that their investment is supported by the government reduces concerns about potential financial losses. In the unfortunate event of the policyholder's demise, VPBY offeres a death benefit. The purchase price of the policy is refunded to the nominee or legal heirs, providing some financial relief during a difficult time.

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What are the benefits of VPBY?

  • Guaranteed return: The VPBY offers a guaranteed return of 9% per annum, which is much higher than the interest rates offered by other investment options such as fixed deposits or savings accounts.
  • Flexible payout options: The VPBY offers a variety of payout options, including monthly, quarterly, semi-annual, and annual payments. This allows you to choose the option that best suits your needs and circumstances.
  • Loan Benefit In Case of Urgent Capital Need: Policyholders can opt for a loan against the policy after 3 years. The maximum amount of loan under LIC Varishtha Pension Bima Yojana can be 75% of the purchase price paid by  you. LIC will recover the interest rate from every pension installment.
  • Tax benefits: The premiums paid under the VPBY are eligible for tax deductions under Section 80CCC of the Income Tax Act.
  • Return of Purchase Price on Death:  In the event of the demise of the policyholder, the purchase price of the policy was refunded to the nominee or legal heirs.
  • Easy to purchase: The VPBY can be purchased easily through any LIC agent. There are no medical examinations or other eligibility requirements.
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    FAQs

  • How does Varishtha Pension Bima Yojana work?
    Under this scheme, a senior citizen has to pay a lump sum amount to the Life Insurance Corporation of India (LIC), and in return, they will receive a guaranteed pension for a period of 10 years. The pension amount is fixed and is paid monthly, quarterly, half-yearly, or yearly, as per the choice of the pensioner.
  • What is the minimum and maximum pension amount under Varishtha Pension Bima Yojana?
    The minimum pension amount under this scheme is Rs. 500 per month, while the maximum pension amount is Rs. 5,000 per month.
  • What are the tax benefits available under Varishtha Pension Bima Yojana?
    The premium paid towards this scheme is eligible for tax deduction under Section 80C of the Income Tax Act, up to a maximum of Rs. 1.5 lakh per year. The pension received is taxable as per the pensioner’s income tax slab.
  • Can the pensioner surrender the policy before the completion of the 10-year period?
    Yes, the policy can be surrendered before the completion of the 10-year period. However, the surrender value will depend on the policy term and the age of the pensioner at the time of surrender.
  • Will the pension come directly into the account or will I receive a cheque?
    How you receive your annuity depends on what options the company provides and what you decide works best for you. The easiest way to go is to choose direct account credit. This will make the entire process smooth as you would not have to drop a cheque every time into the account. LIC Varishtha Pension Bima Yojana directly credits the amount to your bank account.
  • Will the money last for my lifetime?
    LIC Varishtha Pension Bima Yojana offers a lifetime payment that you will keep receiving as long as you are alive. You only need to show Existence Certificates to certify that you are still alive, and LIC will continue to fund your account with your annuity amounts.
  • Will my spouse continue to receive an annuity after me?
    LIC Varishtha Pension Bima Yojana returns the purchase price to the beneficiary on the death of the pensioner. Annuities will stop on your death.

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