Investment Options for Senior Citizens
It is a good news to know that most of the senior citizens today are much better placed and financially independent than they were some decades ago, thanks to the increase in average income and savings in India. There are also many pension schemes and plans designed especially for the senior citizens post their retirement. They no more have to depend on their children’s income.
Another wonderful thing to know is the increase in the average lifespan of a person due to the availability of better healthcare facilities. An increased life span means more number of years post the retirement. Due to this reason it is extremely important to plan one’s retirement so the post retirement years can be led happily, healthy and independently.
Here are a few investment options suitable for senior citizens:
Senior Citizens Pension Plans (Varishtha Pension Bima Yojana)
The varishtha pension bima yojana scheme is run by LIC especially for senior citizens. Under the senior citizens Pension Plans the interest rate offered is highest of all the annuity plans that are offered by other life insurance companies. Since the scheme is a sponsorship of government LIC is offering an interest rate of 9.38% as compared to a maximum of 7.6% offered by the other private life insurance companies.
The disadvantage of LIC varishtha pension bima yojana plan as compared to other programs like senior citizens savings scheme and Post office monthly MIS is that it has a low liquidity. The LIC allows the senior citizens to surrender this pension plan not before a period of 15 years. However, a payment of 2% surrender fee is required if there is an urgent need of money.
Postal Monthly Income Scheme
Post office monthly Income scheme is another pension scheme that gives an assured income on monthly basis. The interest rate is 8.5% per year. The scheme is risk free and requires a minimum investment of Rs.1500. The maximum limit is Rs.9,00,000 in case of joint accounts and Rs.4,50,000 for individual accounts.
The period of maturity is 6 years for which if you remain invested in the scheme, you get a bonus of 5%.
Pension Plans – Jeevan Akshay VI
Jeevan Akshay is actually an annuity plan where the investor is required to make a lump sum payment and then gets annuities at regular periods. With a minimum investment of Rs.150,000 any person between 30 and 85 years can buy this pension plan from LIC. There are six plan options to choose from, all with different policy termination and nomination features and a refund of purchase price.
The plan yields higher incentives in case of purchase price of Rs.250,000 or more. In case of an online purchase, the investor gets a rebate.
The plan has certain demerits like it cannot be surrendered, nor can a loan be taken against it. Inflation is not taken into account when considering the returns.
Senior Citizens Savings Scheme (SCSS)
Considered as one of the most risk free pension scheme for senior citizens, the investment is eligible for deduction under section 80C of the Income Tax Act. The minimum investment required in the scheme is Rs. 1000 and the maximum is Rs. 15 lacs. It has a liquidity period of 5 years and an interest rate of 9% which is the highest among similar ranging schemes. There are different penalties in the cases where the amount is withdrawn before the term of investment gets expired.
A drawback is that the interest earned income from the scheme is not tax free. But the scheme promises attractive returns and safety of one’s capital.