As it is 7.75% GOI savings bonds have ceased to exist and for steady source of income, there are not many options available in these turbulent times which we can look up to as safe investment avenues.
Here's a low down on the positives of the investment option PMVVY for senior citizen
1. Falling interest rate regime; PMVVY offers lucrative return:
With the latest off-cycle rate cut of 40bps, interest rate on fixed income options such as FDs are likely to go further down. And even before such a move, some of the renowned banking names including SBI, HDFC Bank and ICICI have safeguarded the interest of senior citizens and introduced special fixed deposit schemes.
This scheme if parked with the bank for 5 or more years will offer 6.5% but this is also less than the interest rate fixed for PMVVY for the fiscal year 2020-21 of 7.4%.
Also, the scheme offers higher rate of return than other comparable small savings schemes.
2. No credit risk on the instrument:
The senior citizen pension scheme exclusively on offer by LIC is backed by government of India and so there is no credit risk i.e. investors in any case will not face any default on principal or interest repayment.
3. Longer tenure of 10 years:
The longer tenure of the scheme is ideal for senior citizen class as they do not prefer rebalancing their investments every now and then and rather opt for steady flow of income, herein as pension money based on the mode of payment opted for.
4. Premature withdrawal allowed in case of terminal illness of self or spouse:
and in such a case value up to 98% of the purchase price is paid back to the investor. But as per experts being a long tenure investment it scores less on the liquidity front.
5. Survival Benefit:
In case the policyholder survives the entire policy term of 10 years then pension in arrears will be paid. And in a case he or she dies during the term then purchase price shall be paid out to the beneficiary. And in case the pensioners survives till the end of policy term last pension installment together with the purchase price shall be paid out.
And now, being a long term instrument, here in an as the interest rates are on the falling course, one can without a second though lock in funds in the option. Here what needs to be though factored is that you should not be seeing liquidity needs in foreseeable future.