How the Varishtha Pension Bima Yojana (VPBY) Helps Senior Citizens with Tax Savings

The VPBY refers to Varishtha Pension Bima Yojana, intended to secure the finances of senior citizens by the government of India. Launched by the Union Budget of 2014-15, this pension scheme is presented by LIC to citizens above 60 years of age. The primary objective behind this pension scheme is to provide assured regular living income to the aged section of society to ensure they perceive a peaceful life during their advancing years.

What is the LIC Varishtha Pension Bima Yojana?

The VPBY is a defined contribution pension scheme which primarily governs those senior citizens who find themselves in need of a steady income and therefore avail of the various fixed benefits of one frequency – monthly, quarterly, semi-annual, or annual preceded by a lump sum payment for the purchase of the policy.

Eligibility for the VPBY

Below are the requirements set for the benefits of the LIC Varishtha Pension Bima Yojana:

Age: The scheme is available for citizens above 60 years of age. There is no age limit; hence, this scheme has become one of the best schemes for elderly people who require regular income.

Key Features of the VPBY

• Lock-in Period : The policy enjoys a minimum of 15 years, which is considered a lock-in period before even reaching the entire benefits of such schemes.

• Loan Facility : If 3 years pass, one can withdraw up to 75% of his or her purchase price. The amount deducted goes into the annuity payments.

• Lapsing Option : If a policyholder suffers critical illness, the policy can be lapsed and the amount which is received at the time is up to 98% of the premium. After 15 years, a 100% return is done.

• Cancellation : If no claims are made, within 15 days after policy documents are handed over, policy can be canceled.

How VPBY Works

This is an immediate annuity plan under this scheme where the pension will be received as soon as one purchases the policy. The lump sum received here is considered to be the premium, and it provides the person with regular payments of the pension.

The options available for making the payment include:

• Monthly : Small amounts that are paid periodically every month

• Quarterly : Amounts are paid after three months

• Half-Yearly : Amounts are paid after six months

• Yearly : A larger amount received annually.

This plan guarantees lifelong pension benefits for the policyholder. In the unfortunate event that the policyholder passes away, the total premium paid will be refunded to the designated nominee.

Additionally, this scheme offers a guaranteed return of 8% per year on investments made during the first decade. This rate is significantly more favourable compared to many other available schemes targeted towards senior citizens.

Modes of Premium Payment Under VPBY

The LIC VPBY allows pension payments in four modes, each offering different premium payment amounts:

• Monthly : Minimum premium: ₹66,665;

• Quarterly : Minimum premium: ₹66,170;

• Half-Yearly : Minimum premium: ₹65,430;

• Yearly : Minimum premium: ₹63,960;

The pension amount will vary based on the premium paid. Here are the details of the pension payouts across different periods:

Monthly: ₹500 to ₹5,000

Quarterly: ₹1,500 to ₹15,000

Semi-Yearly: ₹3,000 to ₹30,000

Yearly: ₹6,000 to ₹60,000

Benefits of VPBY

The LIC Varishtha Pension Bima Yojana comes with a plethora of features that lend it an appeal for the elderly:

• Guaranteed Returns : This 8% guaranteed return per annum is the main allure when there are many pension plans, something that the senior citizens seek.

• Customizable Payment Frequency : Policyholders can opt for any one of the given pension frequencies that their lifestyle demands.

  • Monthly

  • Quarterly

  • Semi-annual

  • Annually

• Loan Facility : After 3 years of policy purchase, its loans may be obtained against the premium in respect of 75% of the premium paid.

• Tax Benefits : The premiums paid can also come under Section 80C of the Income Tax Act as exempted from tax, thereby adding more value to the policy

• No cheque requirement, all payments are made through ECS or NEFT and hence NO cheque/draft is required.

• Death Benefits : The nominee of the policyholder will get the purchase price at the time of death of the policyholder, so that the family will be financially secured.

• Surrender and Cancellation : The policyholder can cancel the policy within 15 days of receiving the documents or surrender it due to critical illness, with attractive returns.

Documents Required for VPBY

To apply for the LIC Varishtha Pension Bima Yojana, policyholders need to submit:

• If available, provide medical history details.

• Proof of identity and residence (Aadhar card, passport, and voter ID).

• KYC documents.

• An existence certificate that is to be furnished periodically.

Conclusion

The LIC Varishtha Pension Bima Yojana is a possible financial product for elderly persons seeking for an assured income for life after retirement pension. It offers excellent interest rates, coupled with some modification in the payment schedule while protecting from lifetime annuity payments. It also offers a tax benefit, loan facility, and death benefit to the nominee.

VPBY has all these attractive features coupled with several other advantages, making it one of the best insurance plans for a secure investment towards ensuring the financial future of senior citizens while allowing them the joy of spending their golden years without stress and dignity.