People in age bracket of 55-79 years can avail of Varishtha Pension Bima Yojna
Only one person per family can purchase the Life Insurance Corporation's Varishtha Pension Bima Yojna that is to be launched on Tuesday. The scheme offers an assured return of 9 per cent. Those in the age bracket of 55-79 years can avail of the scheme.
According to the scheme, a family has been defined to consist of a spouse, minor children and dependents. Also, the scheme cannot be used at present to avail of a loan facility either from LIC or a bank.
LIC executives said the scheme, which entailed a monthly pension of Rs 250 to Rs 2,500, would require a premium payment in one installment.
The minimum premium has been set at Rs 33,335, while the maximum is Rs 2,77,490. An investment of Rs 2 lakh will fetch a pension of Rs 18,000 a year.
In order to keep management costs lower, LIC has decided to keep an agent's commission at 0.1 per cent of the premium subject to Rs 50 per life covered. Though, the agent commission was low, LIC's sales officials said there was a tremendous interest in the product.
Archana Bhalerao, a high-value agent for the company, said there had been queries about the policy since Finance Minister Jaswant Singh announced its launch in his Budget speech for 2003-04. LIC sources said some corporate agents had asked for over a lakh application forms for the pension plan.
While other annuity plans from LIC offer around 6.5 per cent return to investors, a 2 per cent subsidy by the government is ensuring higher returns at 9 per cent for the Varishtha Pension Bima Yojna.
The government has budgeted to bridge an interest rate differential of 2 per cent for the 9 per cent assured return pension plan for senior citizens.
LIC is targeting to mop up Rs 1,500-2,000 crore from the scheme in the first year. The yield on the corpus has been linked to the prevailing interest rate on a 10-year government paper, which is at present 6.5 per cent.
The company has, however, assumed an interest rate of 7 per cent for the moment and the government will bridge the 2 per cent gap through a budgetary support of Rs 30 crore during 2003-04.
Officials said LIC had sought Rs 20 crore for the purpose, but a further decline in interest rates had been factored in while making the allocation.
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