The Union Cabinet on Wednesday fixed the annual rate of return for Pradhan Mantri Vaya Vandana Yojana (PMVVY), a social income security scheme for senior citizens, at 7.4 per cent for 2020-21 per annum.
"The Union Cabinet extended the PMVVY up to March 31, 2023 for a further period of three years beyond March 31, 2020 and also allowed "initially an assured rate of return of 7.40 per cent per annum for the year 2020-21 per annum and thereafter to be reset every year," an official release said.
The Cabinet also approved an annual reset of the assured rate of interest with effect from April 1 in line with the revised rate of returns of Senior Citizens Saving Scheme (SCSS) up to a ceiling of 7.75 per cent with the fresh appraisal of the scheme on breach of this threshold at any point.
It also approved the expenditure to be incurred on account of the difference between the market rate of return generated by LIC (net of expenses) and the guaranteed rate of return under the scheme.
The minimum investment has also been revised to Rs 1,56,658 for a pension of Rs 12,000 per annum and Rs 1,62,162 for getting a minimum pension amount of Rs 1000 per month under the scheme.
As per the release, the government's financial liability is limited to the extent of the difference between the market return generated by LIC and the guaranteed return of 7.4 per cent per annum initially for the year 2020-21, and thereafter to be reset every year in line with SCSS.
The expenses on managing the scheme are capped at 0.5 per cent of assets under management per annum for the first year of the scheme, and 0.3 per cent per annum second year onwards for the next nine years.
"As such the expected financial liability will range from an estimated expenditure of Rs 829 crore in the financial year 2023-24 to Rs 264 crore in last FY 2032-33," the release said.
The average expected financial liability for subsidy reimbursement, calculated for annuity payment on an actual basis, is expected to be Rs 614 crore per year for the currency of the scheme, it added.
The actual interest-gap (subsidy) would, however, depend upon the actual experience in terms of the number of new policies issued, the quantum of investment made by subscribers, actual returns generated and the basis of annuity payment.
( With inputs from ANI )