Five plans seniors can consider investing for risk-free income
New Delhi: Investors looking for a regular fixed income on their capital have been the most affected in this scenario of falling interest rates. While the best banks offer seniors a maximum of 6% on their term deposits with a term of 5-10 years, small post office savings plans offer relatively higher rates. However, investment experts believe that the currently high rates on small savings plans may not hold and that it is only a matter of time for the government to cut interest rates on these plans well. that for the current April-June quarter the fall in interest rates has been reversed. In that scenario, here are five investment options where seniors can park their hard-earned savings to earn regular income.
1. Savings plan for seniors (SCSS)
SCSS is a five year program and one can open more than one account, but the total amount that can be invested in all accounts is capped at Rs 15 lakh. The interest rate for this plan is set by the government on a quarterly basis. For the quarter running April-June, SCSS will provide 7.4% per year. Once you invest in this program, you will continue to benefit from the interest rate for the entire five-year period. However, interest earned in the Senior Citizen Saving Scheme is fully taxable; it is taxed as “income from other sources”. Considering the high interest rates and sovereign capital guarantee, SCSS is suitable for seniors looking for a high fixed rate of return and regular income on a quarterly basis.
2. Post monthly income scheme (POMIS)
POMIS is also a five year program and once invested the interest rate stays the same until maturity. For the quarter running April-June, the interest rate for this plan is set at 6.6% per year. One can invest a maximum of Rs 4.5 lakh in a single name while a maximum of Rs 9 lakh can be deposited if the account is opened in common name. As the name suggests, interest payment is made on a monthly basis in this scheme.
3. Pradhan Mantri Vaya Vandana Yojana (PMVVY)
This plan has been extended until March 31, 2023. Currently, the plan offers a guaranteed pension at 7.40% per annum payable monthly. However, the interest rate for this plan will be reset on April 1 of each year and, accordingly, the amount of the pension will change based on the new rate. The annual reset of the insured interest rate will be in line with the revised SCSS rate of return but up to a cap of 7.75%. Once this threshold is reached, a new evaluation of the interest rate will be carried out. The maximum investment allowed in this 10 year investment program is Rs 15 lakh. At the end of the 10-year occupancy period, the principal amount as well as the last installment of the annuity will be returned to the purchaser.
4. Variable rate savings bonds
The 2020 Variable Rate Savings Bonds have a term of 7 years and the interest rate on this program will change every six months and is linked to the interest rate paid on the National Savings Certificate (NSC) plus a spread of 35 basis points. Interest on this plan is paid twice a year, on January 1 and July 1. Currently, the plan earns 7.15% interest, which is fully taxable in the hands of the receiver. There is no upper limit for investing in this scheme.
5. Bank term deposits (FD)
Bank term deposits have always been the most popular investment plan for seniors. But in recent times, these schemes have lost their charm due to falling interest rates. Bank FDs offer the ability to choose the payment option you want: monthly, quarterly, semi-annually or annually. Currently, most major banks provide up to 6% interest on FDs to seniors for 5-10 years. However, some of the smaller finance banks and cooperative banks offer an interest rate of over 7% on senior FDs.