Business Desk, ETV Bharat: India’s senior citizens have been the most vulnerable to the recent financial crisis. Not only the risk to their health along with the cost of care has risen significantly, their incomes have taken a massive hit, too.
After the interest rates started falling, returns on fixed deposits (FDs) and other small savings schemes have dwindled, putting the elderly in a spot as most of them solely rely on such interest income for survival after retirement.
Given the scenario, it is important that senior citizens actively look for other investment avenues in order to generate maximum return on their capital, all while keeping their money safe.
“Safety, liquidity, life expectancy, inflation, regular cashflow (interest income) and taxation – these are the six things I feel senior citizens should consider before deciding where to put in their money,” said Viral Bhatt, Founder of Money Mantra.
He added that retired people should also avoid making some common investment mistakes in order to create a big enough corpus. “Investing too conservatively, not planning for the ‘long haul’, buying a lot of policies, starting investment too late and buying insufficient health coverage – seniors should keep a check on that.”
Keeping these factors in mind, here’s a look at some of the investment options for senior citizens that not just offers higher interest rates but also guarantees safety of their investment corpus.
Senior Citizen Fixed Deposits
Despite falling interest rates, many banks like State Bank of India (SBI), ICICI Bank, HDFC Bank and others are still offering 50 basis points extra interest rate on FDs to senior citizens, making them an attractive option. Rates generally hover in the range of 4-8% depending upon the amount and tenure of term deposits. But some small finance banks like Suryoday are in fact offering as much as 9.25% for deposits maturing in five years.
Senior Citizen Fixed Deposits also offer a lot of other features such as loan/overdraft facility, flexible tenures and interest payout options. But keep in mind that the depositor must have crossed 60 years of age on the date on which he/she opens the respective term deposit account.
Senior Citizen Savings Scheme
This is a government-sponsored investment scheme that offers a long-term saving option with higher interest rates for Indian citizens above 60 years of age. It currently offers an interest rate of 7.4%, with depositors receiving interest every quarter.
One can open an SCSS account with any post office or the designated branches of authorized banks. The account shall be opened with a minimum deposit of Rs 1,000 or any sum in the same multiple thereafter, not exceeding Rs 15 lakh at any point in time. The SCSS has an initial tenure of five years, which can be further extended only once for a period of three years.
The deposits made under SCSS are eligible for deduction under Section 80C up to Rs 1.50 lakh each year. However, the interest received is fully taxable and will also attract 10% TDS if the amount of interest exceeds Rs 50,000 in a year.
Post Office Monthly Income Scheme
Post Office Monthly Income Scheme is also a government-backed investment option. Considering the fact that it is meant for investors who are seeking fixed monthly income but are unwilling to take any risks in their investments, it is ideal for senior citizens, though anybody can open an account.
It is a scheme that requires single-time investment and generates monthly payouts. The rate of interest is fixed by the finance ministry every quarter. The current interest rate for June 2020 quarter is 6.6%. The minimum deposit amount is Rs 15,000 and the maximum amount is Rs 4.5 lakh for single accounts and Rs 9 lakh for joint accounts. The scheme comes with a lock-in period of 5 years. However, premature withdrawal is allowed after paying some penalty.
Pradhan Mantri Vaya Vandana Yojana
The Pradhan Mantri Vaya Vandana Yojana is a pension scheme for citizens above 60 years of age with the benefit of guaranteed pension payable on a monthly, quarterly, half-yearly or yearly basis for 10 years.
The rate of pension is decided at the beginning of each year by the government. For 2020-21, the scheme will provide an assured pension of 7.4% p.a., payable monthly.
The pension receivable under the scheme will range from Rs 1,000 to Rs 10,000 per month depending on the amount you have invested. To avail the scheme, you will have to make an initial investment of not more than Rs 15 lakh.
Keep in mind that the scheme is only available up to 31 March 2023 and can be bought online through LIC website or through an LIC agent.
