Varishtha Pension Bima Yojana - Objectives, Eligibility, & Benefits (2024)

Objectives of Varishtha Pension Bima Yojana:

• The Varishtha Pension Bima Yojana is a senior citizen pension scheme designed to benefit people above 60 years by offering them income security with a guaranteed 9% rate of return that was reviewed in the year 2014 that lasted for 1 year.
• Under this scheme, the pensioners should pay a lump sum amount of money to buy a policy at purchase. Once this policy is bought, the pension will be paid quarterly, half-yearly, monthly, or annually. Pensioners can select these pension payment frequencies based on their needs and convenience.
• Though the Government of India announced this scheme, it is administered by the Life Insurance Corporation of India.

Eligibility of Varishtha Pension Bima Yojana:

• Citizens who are above 60 years are eligible to avail this scheme.
• There is no maximum age limit for this scheme; all people aged 60 and above are eligible.
• The policy under VKBY is purchased only with a lump sum amount of money, either at a purchase price of the policy or with the amount of pension to be received.
• The policy should be surrendered after the completion of 15 years. Still, under exceptional conditions (emergency medical purposes), the pensioners can surrender their policy only to receive 98% of the purchase price.

Scheme Highlights:

• This scheme was first announced in 2003 in July by the Government of India that lasted only for one year.
• Later it was again revived for a limited period in 2014 under the NDA government during its last term, which is from 15^th August 2014 to 14^th August 2015.
• For any further updates or information about the scheme, one can follow the instructions on the website: https://financialservices.gov.in/.
• The payment of pension to the pensioner must be through ECS or NEFT.
• The ministry of financial services is maintaining this scheme.

Results:

When this scheme was announced in 2003, a total number of 3.16 lakh policies of VPBY was sold, which amounted to Rs.6,095 crores.

Benefits of this VPBY scheme:

• There are no cash transactions, cheques, or receive a demand draft from purchasing the policy under this VPBY scheme.
• This scheme ensures guaranteed pension with the highest rate of return, 9%, compared to other senior citizen pension schemes.
• Pensioners can choose the pension payment mode whether it is yearly, monthly, half-yearly, or quarterly.
• The policyholders had a choice to cancel the policy within 15 days of purchase of the policy. In such cases, the stamp duty charges are deducted, and then the purchase price will refund the remaining amount

.

• Policyholders can raise a loan against the VPBY scheme after three years.
• Policyholders can enjoy benefits on income tax also as the premiums paid will be exempted under Section 80C of the Income Tax Act. But, the pension received is taxable.
• If the policyholder dies, the premium amount can be refunded to the spouse or nominee as a death benefit.

Features of VPBY Scheme:

• To avail of this VPBY scheme, there is no need for any medical checkups for the policyholder.
• In any emergency case, if the policyholder withdraws the premium amount, then there are 2% of exit load charges levied on the premium amount or the purchase price of the policy.
• The policyholder can take a loan against the VPBY scheme after 3 years, where 75% of the premium amount will be given as a loan, and the rate of interest levied will vary and be decided by LIC.
• This scheme lock-in period is 15 years, where the policyholder can surrender the policy after 15 years and receive the purchase price of the policy.
• If the policyholder’s age is entered wrong in the application, LIC may call for proof of age, as it is not deemed to question just because the date of birth is entered incorrectly.

Working of VPBY scheme:

The VPBY scheme is an immediate annuity plan where it provides annuity payouts to the policyholders. This scheme is a single premium policy where the policyholder pays the premium only once at the time of purchase of the policy. Once the policy is purchased with a lump-sum amount of money, the policyholder regularly receives their pension.

The regularity of the pension payment can be opted by the policyholder, whether it is yearly, half-yearly, quarterly, or monthly. The family member of the policyholder can also receive this pension. If the policyholder dies, then the policy will refund the whole premium amount to the policyholder’s family members. In addition, the policyholder receives the guaranteed 9% rate of return as pension from the date of purchase of policy to 15 years.

Documentation required for VPBY:

There are certain documents to be produced to purchase policy under the VPBY scheme

• Though no medical checkups are done to purchase this policy, the policyholder still needs to submit his accurate medical history records.
• Address proof and KYC-related documents are required to produce to purchase this policy.

Above mentioned documents are needed to produce when the policy is being purchased, but the policyholder needs to submit his Existence Certificate at regular time intervals mentioned by LIC.

If the policyholder wants to surrender the VPBY policy, the following documents are required to submit.

• A Discharge form to surrender the policy.
• An original document of VPBY policy.
• If the policy is surrendered within the lock-in period, then proof of medical treatment of the pensioner or their family member needs to be submitted.

To avail of death benefits under this policy, the following documents need to be submitted.

• Claim forms that are in the format suggested by LIC.
• An original document of VPBY policy.
• The claimant should provide the necessary bank details, including IFSC code, account type, and bank name.
• The claimant should submit a death-proof document that is applicable for this policy.
• Age proof documents need to be submitted if the pensioner did not mention their age under the policy.

FAQs on Varishtha Pension Bima Yojana