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Pradhan Mantri Vaya Vandana Yojana (PMVVY) is now available to senior citizens in its new avatar. Being the sole institution allowed to mobilize funds in the scheme, the Life Insurance Corporation (LIC) has come out with the details of the Pradhan Mantri Vaya Vandana Yojana (Modified 2020). PMVVY, which had earlier closed on March 31, 2020, was recently extended by the government for another three financial years till March 2023.
To invest one may approach any LIC agent or buy it directly from the insurer’s website. The extension of PMVVY will come as a relief to senior citizens as the interest rate on bank fixed deposits seems to be falling in a hurry.
The biggest change in the new modified version is the reduced pension rates. The Modified PMVVY will carry lesser interest rate on the investment than before. Unlike in the older version of PMVVY, in the Modified PMVVY, the interest rate will keep varying depending on the financial year (FY) in which the investment is made.
The scheme is for 10 years and on investments made in the FY 20-21 till March 31, 2021, the government has declared the interest rate of 7.4 per cent payable monthly i.e. 7.66 per cent per annum for the entire duration of ten years. For investments made in the next two FY i.e. 2021-22 and 2022-23, the government will declare the PMVVY interest rate at the start of each FY.
The annual reset of the assured rate of interest will be effective from April 1st of the financial year in line with the revised rate of returns of Senior Citizens Saving Scheme (SCSS). For the Modified PMVVY, the maximum rate of interest is capped at 7.75 per cent at any point.
The government had recently reduced the interest rate on post office monthly scheme to 6.6 per cent while the RBI Taxable bonds and SCSS are available at 7.75 per cent per annum and 7.4 per cent respectively. One may decide to diversify across these investments after keeping the regular income need, taxation and liquidity into consideration.