About Varishta Pension Bima Yojna: 1. Minimum entry age 60 years 2. Only Indian nationals are allowed to invest in this scheme. 3. A one-time investment of a minimum amount of 66665 and the maximum investment are 666665. 4. The minimum pension amount is 500 while the maximum is 5000. 5. It offers a guaranteed return of 9% 6. One has various options to choose from like monthly, quarterly, half-yearly or even annually. 7. On the death of a pensioner, the nominee receives the invested amount back. 8. The maximum limit is not only for individuals but also for the family. Family, in this case, constitutes pensioner, dependents, and spouse. 9. The Pension will get credited to the bank account directly either through ECS or NEFT. 10. One has the option to surrender after a period of 15 years. Surrender value is same as the purchase price. 11. In the case of emergency, like a medical emergency surrender value is 98% of the purchase price. 12. One can avail a loan after three years. The maximum loan one can avail 75% of the purchase price. 13. Loan interest is conveniently adjusted to the pension payment, and one can settle the principal at settlement time. 14. If you are not satisfied with the terms and conditions of this scheme, you may also ask for the refund of your investment amount within 15 days of the date of the policy. How is the Plan Fairing? 1. LIC Varishtha Pension Bima Yojana is a good plan if one is expecting an interest rate downturn in future. The reason being, banks cannot pay the same consistent amount in the long run. 2. Whatever you receive from the plan as income is taxable. So, it is essential to remember this before simply thinking it offers a 9% return. 3. This pension is not planned as per inflation and hence will not take care of inflation. So even if there is a raise in expenses the stream of income remains the same. 4. Varishtha Pension Bima Yojana is a safe plan, as is managed by the Govt. of India and the LIC. 5. The best option as payment is made to the bank account directly. 6. Liquidity is not an issue after 15 years unless it is a health emergency. It is hard for pensioners until 75 years of age if they have any other emergencies. When Should You Not Invest In the Product? • When you are worried about inflation • If you need cash before 75 years of age, as you cannot liquidate the cash except emergencies. • Do not invest if you think expenses are more than 5000 • And certainly, do not invest if your family corpus is more than 666665. Does Service Tax Exemption make LIC Varishtha Pension Bima Yojana more attractive? Varishtha Pension Bima Yojana still does not feel very attractive as the maximum amount is limited to 5000, which in this era would not suffice for any family. The worst part is the ceiling limit is for the family and hence if even the wife invests the maximum pension would only be 5000. The pension is taxable and hence makes it a bad deal. After the tax return, the scheme gets down to 8.1% or 8.44% even if the pensioner falls in the lowest tax bracket of 10%. From another point of view regarding liquidity, it scores low. The money gets locked in for 15 years with a premature withdrawal charge of 2%. To make the pension scheme a budgetary support Mr. Arun Jaitely made this scheme service tax exempted. This scheme was earlier attracting a service tax of 3.09%. This tax was paid over and above the tax, investors were already paying. Pension Scheme, Government Scheme, Pension Plan, Retirement Scheme, LIC Varishtha Pension Bima Yojana
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March 2017
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