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What is the Varishtha Pension Bima Yojana?

During the NDA government’s last time in office, the Varishtha Pension Bima Yojana (VPBY) was created as a pension program for senior persons. A total of 3.16 lakh annuitants will benefit from the scheme, with a total corpus of Rs. 6,095 crores. The Hon’ble Finance Minister proposed to restore the scheme for a limited duration from 15 August 2014 to 14 August 2015 for the benefit of citizens aged 60 and up in his Budget Speech for the year 2014-15. As a result, the Finance Minister publicly inaugurated the revived Varishtha Pension BimaYojana (VPBY) on 14.08.2014, and it was open throughout the period from 15 August 2014 to 14 August 2015.

As a result, anyone who invests in the VPBY during this time will receive a guaranteed return of 9% under the program. The Life Insurance Corporation of India is in charge of the scheme’s administration (LIC). Subscribers to the Scheme receive a pension at a guaranteed rate of 9% per annum after paying a lump sum deposit (payable monthly). The government of India covers any difference between the promised return and the LIC’s return on the fund. This is done through a subsidy payment in the scheme. After fifteen years from the date of purchase of the policy, the annuitant can withdraw the deposit amount.

Features of Varishtha Pension Bima Yojana

  • Citizens above the age of 60 can apply for the LIC Varishtha Pension Bima Yojana. This yojana does not have an upper age limit.
  • The Varishtha Pension Bima Yojana has a 15-year lock-in period.
  • After three years, policyholders can apply for a loan up to 75% of their purchase price. The scheme recovers the interest on the debt through annuity payments.
  • If there is no claim, policyholders have the option to terminate the policy after 15 days of receiving the policy documentation.
  • Policyholders can surrender this pension yojana within 15 years of opening it if they suffer from a critical illness. They could get up to 98 % of the single premium they paid. If the policyholder surrenders the insurance after 15 years, they may be eligible for a 100% refund on the single premium.

How Does Varishtha Pension Bima Yojana Work?

In the form of an immediate annuity plan, the VPBY pays out annuity payouts to senior citizens (policyholders). It is a policy with a single premium. A single premium policy requires policyholders to pay a single lump sum amount at the time of purchase. The policyholders are eligible for a normal pension after paying the lump-sum premium.

During his or her lifetime, the policyholder can choose to receive a pension monthly, half-yearly, quarterly, or annually. The pension is also payable to the policyholder’s family. In the event that the policyholder dies, the scheme refunds the pension purchase amount. The pension policy provides an assured pension based on an annual rate of return of 8% for a period of ten years.

Benefits of Investing in the Varishtha Pension Bima Yojana

  • After the premium amount is paid to the scheme, annuity payouts will be made according to the pension plan selected.
  • The pensioner will receive a maximum pension of Rs. 60,000 each year.
  • In the event of the pensioner’s death, the entire investment purchase price will be returned.
  • The pensioner can claim a tax deduction on the premium paid under Section 80CCC of the Income Tax Act, 1961.
  • This pension system can be effectively linked to other pension schemes, such as endowment policies, PF, mutual funds, and so on, to generate a significant monthly income.
  • The insured receives Rs.5,000 per month after paying a single premium of Rs.6,66,665.
  • The pensioner receives Rs. 60,000 per year for an annual premium of Rs. 6,39,610.

Payment of Varishtha Pension Bima Yojana Premium 

The investor or subscriber can opt to pay the premium under different periodic schemes. The pensioners can pay monthly, quarterly, semi-annually or annually. The following table shows the premium amount under different periods. 

PeriodPremium Amount
MonthlyMinimum Premium- Rs 66,665Maximum Premium- Rs 6.66 Lakhs
QuarterlyMinimum Premium- Rs 66,170Maximum Premium- Rs 6,61,690
Semi-annuallyMinimum Premium- Rs 65,430Maximum Premium- Rs 6,54,275
AnnuallyMinimum Premium- Rs 63,960Maximum Premium- Rs 6,39,610

Pension Amount Under Varishtha Pension Bima Yojana

The payment of pension to the subscribers depends on periodic payment of premium opted by the subscriber. The following table shows the premium amount depending on the pension period.

PeriodMinimum Pension AmountMaximum Pension Amount
MonthlyRs 500Rs 5,000
QuarterlyRs 1,500Rs 15,000
Semi-annuallyRs 3,000Rs 30,000
AnnuallyRs 6,000Rs 60,000

Loan Against the Pension Policy

  • A subscriber can avail a loan against the policy under the Varishtha Pension Bima Yojana. Since the policy is treated as collateral, the loan will be secured. 
  • The loan will be available only after the completion of three policy years from the date of commencement of the policy. The maximum loan amount available under the policy is 75% of the Purchase Price. 
  • However, the sanction of the loan is dependent on the satisfactory title and the following terms and conditions. Moreover, LIC can impose any other terms and conditions from time to time.
  • The Varishtha Pension Bima Yojana shall be assigned to the Corporation on its whole and held by it as security for the repayment of the loan and interest thereon.
  • The interest on the loan will accumulate at the rate provided by the Corporation when the loan is made. The loan amount will be recovered from the pension instalment at the rate specified by the Corporation when the loan is made. The loan interest will be recovered first from the next pension instalment due after the loan is made.
  • In the case of policy surrender or a claim due to death, the Corporation will deduct the amount of the loan and any outstanding interest from the policy money.

Surrender of the Policy

After 15 years from the policy’s start date, the scheme will relinquish the policy. The Purchase Price paid under the policy shall be the Surrender Value. However, under extraordinary circumstances, if the Pensioner needs money to treat a serious or terminal sickness in himself or his spouse, the policyholder can surrender before the 15-year period expires. In such a situation, the Surrender Value payable will be 98% of the Purchase Price.

Settlement of Pension Claim

For benefit payable on the death of the Pensioner:

The normal documents which the claimant shall submit while lodging the claim in case of death of the Pensioner shall be claim forms, as prescribed by the Corporation, accompanied with other documents. Such documents are original policy documents, NEFT mandate from the claimant for direct credit of the claim amount to the bank account, proof of title, and proof of death, whichever is applicable, to the satisfaction of the Corporation. If the age is not admitted under the policy, the proof of age of the Pensioner shall also be submitted.

For pension in payments: 

The Pensioner shall submit the Existence Certificate in the proforma of the Corporation in this regard at the time intervals as prescribed from time to time. 

For benefit payable on surrender: 

The Pensioner shall submit the discharge form along with the original policy document and proof of medical treatment of self/spouse. This is possible if this policy is surrendered before the completion of 15 years and proof of age if the age is not admitted earlier. 

Other Terms and Conditions

Nomination– Section 39 of the Insurance Act of 1938 requires the holder of a life assurance policy to nominate individuals. It is customary to require that the nominee be a close relative of the Pensioner. The notice of nomination or change of nomination should be filed to the Corporation’s office where the policy is serviced for registration. The Corporation accepts no responsibility or expresses any view as to the legitimacy or legal effect of a nomination by registering it.

Forfeiture in Certain Events-There are consequences for breach of conditions, terms, untrue or incorrect statements, personal statements, declarations, and documents. This policy shall be void, and all claims to any benefit arising therefrom shall cease.

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Frequently Asked Questions

What is an annuity in LIC Varishtha Pension Bima Yojana?

Under the LIC Varishtha Pension Bima Yojana, the subscriber receives a regular annuity periodically against the premium paid. The pension will be paid monthly, quarterly, semi-annually or annually as opted by the subscriber.

What documents should I submit to the LIC for Varishtha Pension Bima Yojana?

To subscribe to the VPBY scheme, you need to submit documents supporting medical history, address proof such as Aadhaar, driving licence, Voter ID, and other KYC documents such as PAN, income records and so on.

Should I consider LIC for subscribing to Varishtha Pension Bima Yojana?

With the Life Insurance Corporation of India’s Varishtha Pension Bima Yojana Plan, you may be confident that you will have a continuous stream of income even after you retire. You don’t have to be concerned about financial support from your children, family, or friends. Instead, you can use this plan to stand on your own two feet and achieve all of your goals, even after you retire from your work.