Varishtha Pension Bima Yojana

The Government of India announced the revival of the Varishtha Pension Bima Yojana (VPBY) in the Union Budget 2014-2015. The VPBY is administered through the Life Insurance Corporation (LIC). The VPBY benefits senior citizens aged above 60 years and offers them income security with a guaranteed rate of return.

Under the VPBY, the pensioners can buy a policy at the purchase price by paying a lump sum. After buying the policy, a pension will be payable monthly, half-yearly, quarterly or annually. The pensioners can choose a pension payment frequency according to their convenience and needs.

Eligibility for VPBY

The LIC Varishtha Pension Bima Yojana is available for citizens aged above 60 years. There is no maximum age limit under this yojana.

Features of VPBY

Below are the features of the LIC Varishtha Pension Bima Yojana:

Lock-in period: The VPBY has a lock-in period of 15 years.

Inclusion: The policyholders can avail of a loan after the completion of three years up to a maximum of 75% of their purchase price. The loan interest will be recovered from the annuity payments.

Surrender: In case of any critical illness, the policyholders can surrender this pension yojana within 15 years of opening. They will receive up to 98% of the single premium paid. If the policyholder surrenders the policy after the completion of 15 years, then they can get up to 100% returns on the single premium paid.

Cancellation: The policyholders have the option to cancel this policy within 15 days of receipt of the policy documents, provided there is no claim.

How Does the VPBY Work?

The VPBY gives annuity payouts for senior citizens (policyholders) in the form of an immediate annuity plan. It is a single premium policy. A single premium policy means that the policyholders need to pay a lump sum amount at the purchase of the pension policy. After paying the lump-sum premium, the policyholders are eligible for a regular pension. 

The policyholder can opt for receiving pension monthly, half-yearly, quarterly or annually during his/her lifetime. The pension is also payable to the family of the policyholder. In case the policyholder dies, there will be a refund of the purchase price of the pension. The pension policy offers an assured pension based on a guaranteed 8% rate of return per annum for ten years.

Mode of Premium Payment Under VPBY

The LIC VPBY offers four modes of premium payment, which are as follows:

• Monthly: The policyholder will receive the annuity amount monthly. The premium payment amount is less compared to the other modes of payout.
• Quarterly: The policyholder will receive the annuity amount every three or four months a year.
• Half-Yearly: The policyholder will receive the annuity on a half-yearly, i.e. once every six months.
• Yearly: The policyholder will receive an annuity amount yearly. However, the premium payment amount is large compared to the other payout modes.

The minimum and maximum premium payment for each payout mode are as follows:

Period of Investment	Minimum Premium Payment (Rs.)	Maximum Premium Payment (Rs.)
Monthly	66,665	6,66,665
Quarterly	66,170	6,61,190
Semi-yearly	65,430	6,54,275
Yearly	63,960	6,39,610

Pension Under VPBY

The LIC VPBY offers pension to the policyholders based on their premium payment/investment. The minimum and maximum pension amount for each pension period are as follows:

Period of Investment	Minimum Pension Amount (Rs.)	Maximum Pension Amount (Rs.)
Monthly	500	5,000
Quarterly	1,500	15,000
Semi-yearly	3,000	30,000
Yearly	6,000	60,000

Benefits of VPBY

• All pension payments are made by ECS or NEFT. Thus, there is no requirement to encash the amount through a cheque or receive a demand draft.
• It offers an assured pension with an 8% guaranteed interest rate per annum, which is higher than many other senior citizen pension schemes.
• The policyholders can opt for receiving the pension through different payout modes, i.e. monthly, half-yearly, quarterly, or yearly.
• The policyholders can cancel the policy within 15 days from the receipt date of the policy. The premium amount will be refunded after deducting stamp duty charges in such a case.
• It offers death benefits also. When the policyholder dies, the premium payment will be refunded to the nominee or spouse.
• The policyholder can take a loan against the VPBY after three years. 
• It offers benefits on income tax, i.e. the premiums paid are exempted under Section 80C of the Income Tax Act. However, the pension amount will be taxable.

Documents Required for VPBY

• Accurate medical history.
• Address proof.
• KYC related documents.

The policyholder must also submit the Existence Certificate at specified time intervals in the proforma of LIC.