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High-interest paying schemes for Senior Citizens

Gaurav Areng
·4-min read
Senior retired man and woman couple in park looking at  their smart phone and laughing in Delhi, India
Senior retired man and woman couple in park looking at their smart phone and laughing in Delhi, India

The current (COVID) times have left most Indian citizens uncertain as to where to keep their money safe. One can only imagine that the worry is multiplied for our senior citizens, who have done their share of work and generated a certain amount of wealth, to live out their retirement at ease. The falling rates of interest can create worry, as fixed monthly earnings from investments may have dipped., for many. Whether a self-employed person or salaried, one looks forward to enjoying his/her retirement.

As with most investments, there is always a level of volatility, but then again, there are safe bets that may not garner a high earning but are sure to deliver some earning for the investor. A healthy investment portfolio would be a mix of low and high-risk investment options with the ratio in each, varying, based on age, occupation, amount invested, tenure, and more importantly, individual investment goals.

Here, we are not discussing the ideal investment portfolio and mix of investment instruments to build one. We are going to take a look at the best investment options for senior citizens in 2020.

Tax-free bonds

These bonds carry the highest safety ratings and are issued by institutions such as HUDCO, REC, IRFC, and NTPC. This is an ideal option for a retiree, who has paid his taxes while employed, as he could enjoy his earnings from this investment with tax-free interest. This is a superb option for senior citizens to plan their expenses as it will guarantee them a fixed annual income. There is however a clause when investing in tax-free bonds; the investor must be ready to keep his money invested for a minimum tenure of 10 years.

Post Office Monthly Income Scheme

The POMIS or Post Office Monthly Income Scheme is another safe investment option backed by the government to help senior citizens save a fixed amount every month. The limit an individual senior citizen can invest is Rs.4.5 Lakh and Rs.9 Lakh in a joint account. The current interest rate is rather healthy, at 7.6%. In the past, most senior citizens would opt for an FD, but given the rate of interest this scheme offers coupled with the fact that it is government-led, it has now become a preferred mode of investment. The earnings are sent directly to the investor’s Post Office account, but also has a lock-in period - of 5 years.

Senior Citizen’s Saving Scheme (SCSS)

The Senior Citizen’s Saving Scheme or SCSS is another great investment option coming in a close second to the POMIS in terms of interest offered, with 7.4%, which is in fact one of the highest interest rates in a small savings scheme in the country. What’s more is that the investment amount can range from Rs.1,000 to Rs.15 Lakh with a maximum term of 5 years, extendable up to 8 years. This scheme offers quarterly payouts with tax deduction under Section 8oC for up to 15 Lakh per annum.

Immediate Annuities

This scheme is offered by Life Insurance companies, ensuring guaranteed pension payouts for a lump sum investment; this is definitely a winner with senior citizens who took for a guaranteed payment. This scheme has different payout options to choose from. The investor can draw out the payment like a pension across his/her lifetime, paid out to the spouse upon the investor’s death, or even as a return of the entire amount to the investor’s heirs. This flexibility also provides peace of mind to the senior citizen as it takes care of the family in the event of his/her demise.

Immediate annuities offer an interest rate of 5-6% per annum and offer tax exemption under Section 8oC.

Senior Citizens Fixed Deposits

We can agree that the term ‘Fixed Deposit’ puts most of us at ease as it is a saving scheme we’re most familiar with for some reason. The creation of an FD is simple, it is linked with your bank account, you can avail of it through a trusted Banker and you can choose the payout frequency as per your needs. What’s great for senior citizens is that an FD offers a preferential rate of interest to them at a tenure of their choice - ranging from 1 to 10 years or even beyond. The scheme also offers a tax exemption of Rs.1.5 Lakh per annum under Section 8oC.

Pradhan Mantri Vaya Vandana Yojana

The Pradhan Mantri Vaya Vandana Yojana or the PMVVY is a low-risk pension plan offered by LIC. It offers a fixed rate of interest at 8% with a tenure of up to 10 years. The pension payout will range from Rs.1,000 to Rs.10,000 per month depending on the amount invested (limited to a maximum of Rs.15 Lakh). This scheme is not eligible for tax deductions under Section 8oC but is exempt from GST.