Pradhan Mantri Vaya Vandana Yojana

The PMVVY was a 10-year guaranteed pension for senior citizens, operated by LIC of India for the Government of India. You paid a purchase price, received a fixed pension for ten years, and got the purchase price back at the end.

The subscription window closed on 31 March 2023. No new enrolments have been accepted since; existing policyholders continue to receive their contracted pension for the rest of their term.

It stays in the paper because advisers still meet retirees holding it — and because its mechanics make a clean contrast with an annuity.

Pension and price.

The purchase price is marginally lower if quarterly, half-yearly or annual pension is chosen. The maximum pension ceiling applies to the family — pensioner, spouse and dependents together.

Liquidity. 98 per cent of the purchase price is returned on surrender for specified needs such as critical healthcare. After three policy years, a loan of up to 75 per cent of the purchase price is available at prevailing interest rates.

Income. Guaranteed for 10 years, in monthly, quarterly, half-yearly or annual mode. Not responsive to inflation.

Tax. Pension is taxable as income in the hands of the annuitant.

Maturity. The investment is returned.

Kamala bought the maximum PMVVY in March 2023, days before the window closed: Rs 15,00,000 for a Rs 10,000 monthly pension.

The implied yield.

Annual pension = 10,000 × 12 = Rs 1,20,000
Yield          = 1,20,000 ÷ 15,00,000 = 8.0%

The minimum works out the same: 1,000 × 12 ÷ 1,50,000 = 8.0 per cent.

Over the 10 years:

In year 2 she needs money for surgery. She can surrender for a critical healthcare need and receive 98 per cent: Rs 14,70,000. A loan is not yet available — that needs three policy years, and would then be up to 75 per cent, Rs 11,25,000.

What an annuity would not have done: return the Rs 15 lakh at the end without her choosing (and paying for) a return-of-purchase-price option. What it would have done that PMVVY does not: pay for life rather than for 10 years.

Chapter 2, section 2.10.6, records the scheme and the closure of its window on 31 March 2023. Chapter 6, section 6.2.2 (Distribution Products), profiles it in full — limits, family ceiling, surrender and loan terms, income, risks and tax — with a note on the closure. Expect recall of the Rs 1,000 / Rs 1,50,000 and Rs 10,000 / Rs 15,00,000 pairs, the 98 per cent and 75 per cent figures, and above all that the scheme is closed to new subscribers.

• It is closed. No new enrolments after 31 March 2023. A question offering it as a product for a new retiree is testing exactly that.
• The workbook misstates the annual maximum. Chapter 6 says the maximum pension is "Rs 10,000 per month or Rs 12,00,000 per year". Rs 10,000 a month is Rs 1,20,000 a year; the Rs 12,00,000 figure is a typographical error.
• Eligibility wording differs between chapters. Chapter 2 says citizens who have completed 60 years of age; Chapter 6 says citizens of 60 years "in the private sector". Both put the age at 60.
• The scheme name is spelt "PMVYY" once in Chapter 6; the correct abbreviation, used elsewhere, is PMVVY.
• 10-year term, not lifelong.
• The pension ceiling is per family, not per person.
• 98 per cent on surrender for specified needs; 75 per cent loan after 3 policy years.
• Operated by LIC, not by the post office.