A good deal for seniors

PENSION/ Replacement of Varishta Pension Bima Yojana

Senior citizens have cause to cheer with the government deciding not to lower their returns in keeping with market-related interest rates.

The United Progressive Alliance (UPA) has decided to continue subsidising returns for senior citizens at nine per cent, but packaged under the Senior Citizens Savings Scheme.

Replace the former government's Varishta Pension Bima Yojana "" which offered senior citizens nine per cent return for life "" the new scheme will equally be taxable.

Clear details of the new scheme have yet to be defined in terms of whether there will be any ceiling on investment. In Varishta Pension Bima Yojana, there was a cap on investment whereby an individual could earn a maximum of Rs 2,000 per month.

Further, Varishta Pension Bima Yojana was applicable to individuals over the age of 55 years. However, the book definition of senior citizens points to those above 60. The government has yet to define the age limit.

The Life Insurance Corporation of India (LIC), which current administers the existing scheme, is unlikely to have any role to play as the scheme will be similar to that of postal savings or public provident fund.

The former prime minister Atal Bihari Vajpayee on launching Varishta Pension Bima Yojana on July 14, had stated that the government would review in scheme.

S B Mathur, chairman, LIC, said that in the current year the government subsidy on Varishta Pension Bima Yojana will rise to Rs 370 crore provided the scheme is closed down in the next few days. "Otherwise, it will now attract even more funds from the Indian populace," he added.

The scheme till June 15 mopped up Rs 807.89 crore with the sale of 41,710 policies.

Last year, this government-sponsored plan raised almost Rs 6,000 crore, and the government will have to provide a subsidy of Rs 240-250 crore in order to meet the shortfall in yields.

Against the assured nine per cent annual return, the yield on the corpus is close to 6per cent, said Mathur.