Know where you would get maximum returns: Top 5 investment options for senior citizens

At the ripe age, the only source of income that remains is interest from funds earned in whole life, however, the volatility of interest rates is prone to multiple factors from policy makers’ decisions. 

In this regard, the government has come up with multiple saving and investment schemes for senior citizens and the retired, who had just averted the post office small savings interest rate scare. 

Earlier this year, the finance minister had reversed the decision of lowering the Small Savings interest rates for the first quarter of the financial year 2021-2022 and maintained the same as that of the previous quarter of FY21. This relief could be time-being as RBI in its April 7 policy meet took measures that led G-Sec yield fall and the interest rates may remain muted for some time now. 

So, what is an alternative for a retired and senior citizen investor to put his/her life savings in order to get a regular income and also manage one’s expenses? 

The five most popular investment options for senior citizens to keep liquidity, safety, and returns under control are:  

1. Senior Citizen Saving Scheme (SCSS) 

Interest rate: 7.4 per cent 

Payable: Each quarter 

Tenure: 5 years 

An account could be opened under this saving scheme for a period of five years and above, with the total limit capped at Rs 15 lakh. Interest earned under SCSS is fully taxable and added to one’s income from other sources too.  This scheme is for those investors, who are looking for a high fixed rate of return and a regular income on a quarterly basis. the interest rate under this scheme is at 7.4 per cent per annum for the current quarter (April to June 2021). 

2. Pradhan Mantri Vaya Vandana Yojana (PMVVY) 

Interest rate: 7.4 per cent 

Payable: Each Month 

Tenure: 10 years 

This saving scheme has been extended up to March 31, 2023, which will turn out to beneficial to the senior citizens as the entry age is 60 years. PMVVY was providing an assured pension of 7.40 per cent per annum payable on a monthly basis and thereafter to be reset every year for the first financial year i.e. up to March 31, 2021. The maximum amount of investment is capped at Rs 15 lakh. 

The annual reset of the assured rate of interest from April 1st of the financial year is in line with the revised rate of returns of SCSS up to 7.75 per cent with a fresh appraisal of the scheme on breach of this threshold at any point. On survival of the pensioner to the end of the policy term of 10 years, the amount invested (Purchase price) along with the final pension installment shall be payable. 

3. Post Office Monthly Income Scheme (POMIS) 

Interest rate: 6.6 per cent 

Payable: Each Month 

Tenure: 5 years 

With a tenure of 5 years, once invested in this scheme the interest rate continues to remain the same till maturity. The interest rate is 6.6 per cent per annum for the quarter ending June 2021. Senior citizen investors can invest a maximum of Rs 4.5 lakh in a single name while a maximum of Rs 9 lakh can be deposited in POMIS in a joint name. 

4. Bank fixed deposits (FD) 

Interest rate: Around 6 per cent 

Payable: Monthly, quarterly, half-yearly or annual interest 

Tenure: 7 days to 10 years 

Bank fixed deposits (FD) have always been  

One of the most popular and the first choices for the majority of senior citizens has been fixed deposits of banks. These investment options are most flexible as it gives an option of choosing the interest rate payouts as they offer monthly, quarterly, half-yearly, or annual interest income to the FD holders. 

On average, all commercial banks offer interest rates above 6 per cent. However, depending on the bank and tenure, the majority of small finance banks offer over 7 per cent interest on the basis of investment tenure. In addition, half a per cent is been allowed by all banks on the deposits. 

Some prominent banks such as SBI, ICICI Bank, and HDFC Bank offer special deposits to senior citizens on deposits of 5-years and above. Around 0.3 per cent is additionally payable on 5 years and above tenor under SBI Wecare Deposit’ for senior citizens. 

5. Floating Rate Savings Bonds 

Interest rate: 7.15 per cent 

Payable: Half-yearly 

Tenure: 7 years 

With a tenure of seven years, interest rates under this scheme keep varying during till maturity. The coupon rate for the first coupon period, payable on January 1, 2021, was fixed at 7.15 per cent. The coupon/interest of the bond is reset half-yearly on every July 1st and January 1 of every year. The coupon rate will be linked/pegged with the prevailing National Saving Certificate (NSC) rate with a spread of 35 basis points over the NSC interest rate.