Any citizen of the country above 60 years is termed by law a “Senior Citizen”. It is said that the years after retirement are the golden years of your life. Live them happily, completely, and finances should never come as a constraint during that period. You have spent all of your life working and making ends meet, now is the time to relax. It is possible only when you plan your finances properly.
Here are the most popular investment plans for senior citizens to grow their hard-earned savings.
1. Pradhan Mantri Vaya Vandana Yojna (PMVVY):
This is a pension scheme announced by the Government of India for senior citizens and is extended up to 31st March 2023. The entry age in the scheme is 60 years, and the tenure is 10 years. The maximum investment amount is capped at Rs 15 lakh. For 2021, the scheme has provided an interest rate of 7.4%, which is to be reset every year. This interest is paid to the pensioner at the end of each period as the investor chooses at the time of investment (monthly/quarterly/yearly).
On survival of the pensioner beyond 10 years of the policy term, the principal and the final installment of the pension are paid, whereas, in case of death of the pensioner, the principal is paid to the beneficiary.
There is also a cap on the minimum and maximum pension in this scheme, with the minimum pension being capped at Rs. 1000/- per month and maximum pension at Rs.9250/- per month.
The pensioner can also avail of a loan up to 75% of the purchase price, if the need arises.
2. Post Office Monthly Income Scheme (POMIS):
Provided by the Indian Post Office, Monthly Income Scheme allows investors to invest a lump sum amount with the post office and receive monthly interest repayment at a fixed interest rate decided periodically by the government. Currently, the interest rate is 6.6%, and the tenure is set at 5 years.
This is one of the guaranteed investment plans where your life savings stay safe while providing you with a monthly income for your expenses.
3. Senior Citizen Savings Scheme (SCSS):
SCSS is a government-sponsored retirement benefits scheme for senior citizens, launched in 2004. It offers a regular source of income for senior citizens with utmost safety for their savings and guaranteed returns.
The tenure of SCSS is 5 years, and more than one account may be opened, but the total investment limit is capped at Rs 15 lakhs. The interest in SCSS is payable quarterly and is currently at 7.4%. The interest through SCSS is completely taxable as per the investor’s tax slab.
4. Floating Rate Savings Bonds:
These bonds are issued by the Reserve Bank of India and hence, guarantee utmost security. They have a lock-in tenure of 7 years, and the interest rate keeps varying during the tenure. Interest is paid half-yearly to the investors in January and July each year. The interest rate as declared currently on these bonds is 7.15 %.
The interest on these bonds is taxable as per the income slab of the investor. The interest paid is subject to TDS.
Though the lock-in period is 7 years, it is lower for senior citizens, and premature redemption is allowed with a penalty.
5. Fixed Deposits
Fixed Deposits for senior citizens are an excellent option to convert life savings into a monthly source of income. Senior citizens enjoy preferential rates of interest on Fixed Deposits across all financial institutions. They can put their retirement funds and life savings in Fixed Deposits with a monthly interest repayment option. With this mode, the interest accrued on the deposit principal amount is credited to the savings account of the investor every month. While the principal amount lies safe with the bank, they can use this monthly credit to cover the expenses. They can also avail of a loan against FD if required.
While the above options are the most relevant senior citizen schemes, bank Fixed Deposits enjoy a special place in the hearts of this population due to numerous reasons. Some of them are:
1. Their hassle-free investment process, readily available funds, and over-the-counter customer servicing of banks and NBFCs.
2. Fixed deposit interest rates for senior citizens are higher than those for others, making the FD senior citizen scheme one of the most lucrative investment options.
3. They can be used as tax saver funds if invested under a 5-year tax saver FD.
4. They can choose interest payout options as per their choice: monthly, quarterly, half-yearly or yearly.
5. This regular interest payout option acts as a steady source of income for retired people.
6. The interest earned on these Fixed Deposits is liable for taxation as per the applicable rules. However, the investor can submit a 15H form to stop the bank from deducting the TDS.
7. Super senior citizens (above 80 years of age) have different preferential rates on the bank FDs.
For 2021, while most of the bank's interest rates range from 2.9% to 6.3% for 1-5 years, the highest interest rate is currently being provided by Shriram Finance which goes up to 9.40%* p.a. inclusive of the special interest benefit of 0.50%* p.a. for senior citizens and 0.10%* p.a. for women depositors.. With that high interest rate on your savings and hassle-free deposit services, with just four steps to open an FD account, Shriram Finance fixed deposits can help you plan your finances better when you are in the golden years of your life.
