Articles 789 views March 30, 2020

Senior Citizens, those who have retired from their earning phase can build a retirement corpus through various investment schemes available in the market. The highest order of benefits associated with Pension schemes are that they keep tax liability at bay and provide a steady stream of income for your livelihood. 

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Building a retirement portfolio is considerably convenient with a mixture of market-linked investment options as well as some fixed income options. However, the challenge is in finding the right investment balance as per one’s requirement and to not outlive the investment scheme or plan. Here are the top five Pension Schemes for Senior Citizens that will help build a solid portfolio and will also take care of your monthly household expenses. 

Top 5 Pension Schemes for Senior Citizens-

Bank Fixed Deposits:

Bank’s Fixed Deposit, first on the list, is commonly referred to as “FD ” and is a popular choice among most Senior Citizens. The main reasons behind its popularity are safety, fixed returns, ease of operation and reliability. Additionally, there is flexibility in the tenure of these bank deposits unlike other top schemes. This aids distribution of funds across different maturities (Also known as “Laddering”) than locking funds for specific tenure. Along with liquidity, this scheme also manages the re-investment risk. On the downside, its interest rate is much lesser than other pension schemes. About tax benefits, the interest income is taxable and not all FDs are eligible for tax-benefits.

Mutual Funds:

The likelihood of not earning after retirement is more common than otherwise. Therefore, investing and saving a considerable sum to cover for the non-earning period can be done through equity-backed products. It is important to account for inflation costs as retirement income is subject to it, so that the income saved is sufficient to cover for the retired lifestyle. According to studies, equities tend to comparatively give higher inflation-adjusted returns than other schemes. The risk, however, differs and can be chosen as per requirement. You can diversify your investments between large-cap, medium-cap or small-cap funds. Additionally, there is an option to avail Monthly Income Plans under this (MIPs). Liquidity is fairly easy. Diversification of investments is to ensure regular returns rather than volatile. About tax benefits, it is a better choice than FDs, especially for those that fall under the highest tax bracket. Taxation of profits is comparatively less too. 

Senior Citizen Savings Scheme:

Senior Citizen Saving Scheme (SCSS) is the most popular choice of Pension Scheme for Senior Citizens. It is available specifically for all senior citizens, people above the age of 60 years. This scheme comes for 5 years tenure and can be extended for 3 years after maturity. But the interest rate remains fixed for the entire tenure. It is payable quarterly. In addition, the Senior Citizen Savings Scheme allows premature withdrawals too. Currently, this scheme provides the highest post-tax returns compared to all other comparable fixed income taxable schemes. The interest rate is fully taxable too. However, the capital invested is eligible for tax benefits under Section 80C. 

Post Office Monthly Income Scheme (POMIS) Account:

This scheme too is a five year investment. The interest rate is set each quarter and is payable on a monthly basis. The maximum capital allowed is Rs. 9lakhs under joint ownership and Rs. 4.5 lakhs under single ownership. On the downside, investment in this scheme is not beneficial in terms of tax benefits. The interest too is fully taxable. You can choose to get your interest directly credited to the savings account of the same post office instead of visiting each month. All the more, one can also mandate to automatically transfer the interest from the savings account to a recurring deposit. However, it should be in the same office. 

Life insurance pension plans:

When talking about senior citizen schemes, life insurance pension plans cannot be ignored. These plans help in creating a retirement corpus for the individual and also promise lifelong incomes through annuity payments. The premium paid towards the plan is allowed as a tax-free investment under Section 80C. 1/3rd of the corpus created under the policy can be withdrawn in lump sum. This withdrawal would be tax-free. However, the annuity payments would be taxable.

Conclusion-

The aforementioned schemes are among the top Pension Schemes for Senior Citizens. The idea behind diversifying investments is to build a retirement portfolio of variety. For schemes that are influenced by market forces, the decision of what scheme to invest in should depend on the willingness to take risk. On the other hand, for those with almost no risk, the investment must depend on the tax benefits, interest rate, liquidity and frequency of assured returns. 

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