The controversial 15-year lock-in period clause in Life Insurance Corporation's Varishtha Bima Yojana may be reduced to 10 years or 65 years of age of the individual.

The government is considering such a proposal, a senior government official said on Thursday.

• Varishtha Pension Scheme: FAQ

The 15-year lock-in period in Varishtha Bima Yojana was too strict a condition and has faced loud protests from senior citizens. This has led the government to reconsider the lock in period and bring in some flexibility.

Sources said a change in the 15-year lock-in was likely to come along with a change in the initial three-year lock-in period for availing loan against the sum invested, at a rate higher than the 9 per cent rate offered by the scheme.

Sources said that the former was discussing the change in the lock-in period with LIC because this would require changed financial management model. The scheme was launched through LIC.

The reduction of the lock-in period will have to be matched with LIC's investment to be parked in long term bonds offering higher yields.

The subsidised high-return Varishtha Bima Yojana annuity scheme was proposed in the budget and launched July 14. It faced flak from senior citizens who were not very comfortable with lock-in period, seen to be too long.

"An individual starts receiving the pension at the age of 55 years and has to keep his money locked in till the age of 70. The average life span of an Indian being far less than 70 years, the possibility that the individual would be able to withdraw the money will be ruled out if the lock-in was 15 years," said the source.

Individuals above 55 years of age would have even less opportunity of withdrawing the money if the lock-in was so long.

The government had earlier fixed 79 years as the cut off age for individuals who could avail the scheme. This was later removed after protests by senior citizens.

The age limit of 79 was arrived at for administrative reasons and there were no actuarial implications.

Those affected by the restriction have been vocal in their protest, compelling LIC to take a re-look at the terms of the scheme.

LIC expected to average a return of close to 7 per cent on investments, with the difference being met by the government.