A retired teacher in Pune hears from a neighbour that there is a government scheme paying 7.4% a year, guaranteed, for ten years. She walks into a branch to buy it and is told it no longer exists for new buyers. That is the position with the Pradhan Mantri Vaya Vandana Yojana, usually shortened to PMVVY. It was a pension scheme for people aged 60 and above, and sales stopped on 31 March 2023.
So why read about it now? Because anyone who bought a policy before the deadline still holds one that runs until 2033 or later, because offers may still circulate under its name, and because its design is a useful yardstick for judging any pension product offered to you today. This guide explains how the scheme worked, what the numbers looked like, how policyholders can use the loan and exit rules, and what to look at if you are choosing a pension option now.
What the scheme was and who ran it
PMVVY was a Government of India subsidised pension scheme for senior citizens, run on the government’s behalf by Life Insurance Corporation of India (LIC), which was the only insurer authorised to operate it. LIC describes the plan as non-linked and non-participating. In plain words, your pension did not move with the stock market and you did not receive bonuses; the rate was fixed when you bought.
LIC’s brochure explains that the Government of India extended the sale period of the modified 2020 version for three years, from 2020-21 to 31 March 2023, and describes the plan as subsidised by the Government of India. Earlier versions of the scheme had been sold before it, and their purchases count towards the same overall cap.
Is the Pradhan Mantri Vaya Vandana Yojana still open?
Sales have closed. No new policies can be bought under the modified 2020 version. LIC’s brochure says the scheme was available up to 31 March 2023, and its FAQ repeats that sales ran only up to that date. We did not find an official extension beyond it. Any website, agent or message that offers you a fresh PMVVY policy today deserves suspicion, so check licindia.in and call LIC directly before paying anyone.
If you already hold a policy, your position is unchanged. Policies bought before the deadline continue for their full ten-year term at the rate fixed on the day of purchase. A policy bought in March 2023, for instance, pays until March 2033.
How the pension worked: the key terms
You paid a lump sum called the purchase price. In return you received a fixed pension for ten years, and at the end of the term you got the purchase price back. Here are the main terms from LIC’s brochure and FAQ.
| Feature | Term under the modified 2020 plan |
|---|---|
| Entry age | 60 years completed, no upper age limit |
| Policy term | 10 years |
| Assured rate | 7.40% a year for monthly pension, equal to 7.66% a year when compounded; this rate applied to policies sold up to 31 March 2023 |
| Pension modes | Monthly, quarterly, half-yearly or yearly, paid in arrears |
| Pension range (monthly mode) | Minimum ₹1,000, maximum ₹9,250 a month |
| Purchase price (monthly mode) | Minimum ₹1,62,162, maximum ₹15 lakh |
| Overall cap per senior citizen | ₹15 lakh across all PMVVY policies, including earlier versions |
| Payment of pension | Through NEFT or the Aadhaar Enabled Payment System; Aadhaar validation needed to buy |
The first pension instalment came after one month for the monthly mode, three months for quarterly, six months for half-yearly and a year for yearly. The rate did not depend on your age; LIC’s brochure calls the rates age independent.
How the rate was set
The Ministry of Finance reviewed the guaranteed rate at the start of each financial year. LIC’s FAQ states that the 7.40% rate stayed unchanged for policies sold in 2022-23, and that the rate contracted at purchase remains the same for all ten years. A later reset therefore never reduced the pension of someone already holding a policy.
A worked example with round numbers
As an illustration, say a 68-year-old buys a policy with a purchase price of ₹10 lakh and chooses the monthly mode. LIC’s rate chart gives ₹74 a year for every ₹1,000 of purchase price in the monthly mode. That works out to ₹74,000 a year, or about ₹6,167 a month, credited to the bank account.
- Pension received over ten years: about ₹7.4 lakh.
- Purchase price returned at the end: ₹10 lakh, along with the final pension instalment.
- Total cash in hand across the decade: about ₹17.4 lakh.
- At the ₹15 lakh ceiling, the pension reaches the ₹9,250 monthly maximum.
The yardstick for judging this is the rupee you get back. The ₹10 lakh returns after ten years in nominal terms. If you assume 5% inflation a year for illustration, its buying power by then is closer to ₹6.1 lakh. That is the trade you make with any fixed pension: stable income, shrinking purchasing power. Our guide on real return explains how to compare a fixed rate with inflation.
Death benefit, maturity, loan and early exit
The scheme was built around the family as much as the pensioner. The terms for the payouts are straightforward.
- If you die during the term: the purchase price is refunded to the nominee or legal heirs.
- If you survive the ten years: you receive the purchase price plus the final pension instalment.
- Loan: available after three policy years, up to 75% of the purchase price. On the ₹10 lakh example that is up to ₹7.5 lakh. Loan interest is recovered from the pension, and any outstanding loan is recovered from the final claim.
- Early exit: permitted for treatment of a critical or terminal illness of the pensioner or spouse. The surrender value is 98% of the purchase price, so ₹9.8 lakh on the example.
The loan rate is decided at periodic intervals. LIC’s FAQ mentions 9.5% a year for loans sanctioned under earlier versions up to April 2022, which tells you the loan was not cheap. Treat it as an emergency option, not a source of regular cash. Because the early exit is allowed only in exceptional circumstances, you cannot leave simply because a better rate has appeared elsewhere.
The free-look window
A new buyer could return the policy within 15 days of receiving it, or 30 days if bought online, and get the purchase price back after deducting stamp duty and any pension already paid. That window is long gone for existing holders, but the same idea applies to every insurance product you buy now.
Tax and GST on PMVVY
LIC’s policy papers say tax on the plan is as per the tax laws and rates in force from time to time. The brochure also says any GST paid is not counted when benefits are calculated. We could not read an official page on whether GST applied to the purchase, so check your policy papers for any GST line.
The pension itself carries no special exemption in the sources we read. It is normally added to your income, so confirm the treatment with a tax professional before filing. We could not find an official PMVVY-specific tax ruling. Use our income tax calculator to test your overall position.
What current policyholders should do
- Keep the original policy document and note your policy number, the maturity date and the nominee.
- Check that the bank account for pension credit is active. A dormant account can stall payments.
- Confirm that the nominee’s name and details are correct, and update them with LIC if your family circumstances have changed.
- Tell a family member where the papers are. The refund goes to the nominee, who must be able to claim it.
- Do not take the loan unless you must. Its interest is deducted from your pension, which lowers your regular income.
If you are looking for a pension option today
With PMVVY closed, retirees usually compare three routes. The Senior Citizens Savings Scheme at the post office has a rate that the Finance Ministry resets every quarter. Check the current rate on indiapost.gov.in before deciding, as it changes. Bank fixed deposits offer a fixed rate and flexible tenures, and our FD calculator shows the monthly payout option. An annuity from an insurer converts a lump sum into lifetime income, with the rate fixed when you buy.
The main difference is that PMVVY returned your full capital after ten years and also allowed an early exit at 98% in need. Many annuities pay a lifetime income without returning the capital, so read the terms. When you compare any product with the Pradhan Mantri Vaya Vandana Yojana, ask four questions. What is the rate? Is it fixed for life or reset? Do I get my money back? What happens to my family if I die early?
Spotting fake offers and common mistakes
A scheme with a guaranteed rate is easy to imitate, so treat any offer with care. LIC’s own brochure carries a warning about spurious phone calls and fictitious offers, and reminds the public that the insurance regulator does not sell policies or announce bonuses. A real purchase needed Aadhaar validation and went through LIC, offline or on licindia.in. If a caller asks you to send money to a personal account for a guaranteed pension, hang up.
Among genuine holders, the mistakes are usually small but costly. Some forget that pension arrives in arrears, so the first monthly credit came a month after purchase and not on day one. Others assume the loan is free money, when its interest is cut from the pension. A few never told the family that the policy exists, and the nominee then has to hunt for papers after a death. A five-minute conversation at home avoids all three.
Key takeaways
- PMVVY sales ended on 31 March 2023, and existing policies run their full ten-year term.
- The assured rate was 7.40% a year for monthly pension, fixed at purchase.
- The cap was ₹15 lakh per senior citizen, giving a maximum pension of ₹9,250 a month.
- The purchase price is refunded at maturity or to the nominee on death.
- Loans are allowed after three years up to 75%, and illness exits pay 98%.
- Treat any offer of a new PMVVY policy as a red flag and verify with LIC.
This is general information, not personal advice.
