- Date : 09/02/2021
- Read: 4 mins
A look at safe saving and investment instruments for senior citizens that promise healthy returns.
Some investment options offer high returns with higher risk, while others have greater security but lower returns. As a senior citizen, it might be a good idea to invest in a portfolio that combines the two prudently. When it comes to safe investments, senior citizens have traditionally relied heavily on fixed deposits to secure their post-retirement future. However, as RBI lowers interest rates to a record low, the yield from traditional saving instruments such as fixed deposits have decreased significantly.
Therefore, as a senior citizen, you should explore all available alternatives and choose the one that offers the best return for your preferred period of investment. Here are 7 attractive investment options for senior citizens in India.
1. Pradhan Mantri Vaya Vandana Yojana: Operated by the Life Insurance Corporation of India (LIC), this is an investment pension with low risk. With a policy term of 10 years, the scheme is available till 31 March 2023. For FY21, you will get an interest of 7.4% p.a. Under this scheme, the maximum you can invest is Rs 15 lakh. For a pension of Rs 12,000 per annum, the minimum investment required is Rs 1,56,658.
2. Post Office Senior Citizens Saving Scheme (SCSS): This government-backed scheme has a tenure of 5 years (extendable by another 3 years) and returns 7.4% by way of interest. You can start off with a minimum deposit of Rs 1000 and go up to a maximum of Rs 15 lakh in multiples of Rs 1000. SCSS accounts offer much higher returns than regular bank savings deposits.
3. RBI Floating Rate Savings Bonds 2020: Issued by the government, this RBI savings bond gives you interest of 7.15% p.a. As these bonds have a floating rate, the interest rate is reset every six months. The bonds are issued in electronic form. Subscription has been opened in 16 banks, including public sector banks and a few private ones. These bonds, with a tenure of 7 years, require a minimum investment of Rs 1000. You can invest in multiples of Rs 1000, with no maximum limit prescribed.
4. Corporate Fixed Deposits: Though corporate fixed deposit (FD) interest rates may have fallen in recent months, they still provide flexibility and higher rates than bank FDs. For instance, Shriram City's cumulative FD scheme offers 8.09% p.a. interest, with an additional 0.4% p.a. for senior citizens; this means an effective yield of 10.53% for senior citizens. Compare tenures and rates to decide which company's FD works best for you. The tenure is usually 1–5 years, and for most companies that minimum deposit is Rs 5000 or higher. It is highly advisable to check a company's rating before investing in its FD.
5. Post Office Monthly Income Scheme: India Post offers a scheme that is popular among the country's senior citizens. If you are looking for a source of regular income, here’s a scheme that will give you a 6.6% interest p.a., paid monthly. Though it has a lock-in tenure of 5 years, premature withdrawal is allowed on the payment of a small penalty. The minimum investment is Rs 1000, and you can invest in multiples of Rs 1000 up to a maximum of Rs 4.5 lakh (single account) or Rs 9 lakh (joint account).
6. National Savings Certificate: This tool can give you a safe investment avenue while helping you save taxes. You can start with a minimum investment of Rs 1000 with no upper limit, and there is a lock-in period of 5 years. Interest is payable at 6.8%, compounded annually and payable at maturity.
7. Post Office Recurring Deposit: Post office investments are government-backed and considered safe, offering guaranteed returns. The recurring deposit (RD) has a tenure of 5 years and you will have to make monthly investments. After the latest rate revision, you would earn a 5.8% interest per annum, and you can start with a minimum deposit of Rs 100.
It must be noted that investment for senior citizens is not always about earning a high interest rate. The lock-in period, ease of maintenance, and deposit and withdrawal procedures are also important considerations. In the options listed above, senior citizens will find an alternative that is likely to meet most of their preferred parameters.