Senior Citizen Saving Schemes or Bank Bond? Which one is better for a retired person? Check what experts say

Very few want to work after retirement but, they want to make sure they keep earning money. Well, that can be done easily. He or she can continue to earn by investing their money in the market. So, for them, investment with better returns is the best option. However, it is important that after retirement they should invest in those options that are less risky. According to the trends, a 60-plus individual can invest in risk-free options like bank FD and Senior Citizen Saving Schemes (SCSS). However, bank bonds can also be a great option for them, say investment experts.

Highlighting the return that one can expect in SCSS or bank bonds, Kartik Jhaveri, Director — Wealth Management at Transcend Consultants said, "Senior Citizen Saving Schemes are hundred per cent risk-free and one can get an assured 8.6 per cent return in this investment tool." Jhaveri said that interest paid under the SCSS is paid quarterly and its rate of interest is also decided by the government on a quarterly basis. But, for such investors, bank bonds can be an even better option as it gives interest rate to the tune of 9 per cent instead of 8.6 per cent in SCSS. Like SCSS, bank bonds are also risk-free as the government of India is there as a guarantor for the money being taken by banks for the bonds issued by them." 

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Jhaveri said that unlike government bonds, bank bonds are available all the time but for that one needs a Demat account that is necessary for buying a bank bond through a bond broker. He said that in SCSS, one has to be at least 55 years of age to open an account but in bank bond, there is no such age bar. Anybody at any age can buy bank bonds.

Speaking on the SCSS, Jitendra Solanki, a SEBI registered expert said, "If you have retired on superannuation or have taken voluntary retirement, you can also invest under this scheme provided you have completed 55 years of age at the time of opening the account. The age limit does not apply to the retired personnel of the defense services. In either of the cases, the account under SCSS has to be opened within one month from the receipt of retirement money with proof of disbursal. Only the money received as retirement benefits under the terms of such retirement can only be invested under this scheme." 

He said that the initial tenure of the account opened under SCSS is five years but can be extended for once for another period of three years. Deposits made under SCSS can only be withdrawn after completion of one year and that too with a penalty. A penalty of 1.50 per cent of the deposit amount is levied if you close the account after one year but before completion of two years. The amount of penalty comes down to 1 per cent for accounts closed after two years. The deposits under extended account can be withdrawn any time after one year without any penalty. As deposits under SCSS cannot be withdrawn within one year, you should assess your liquidity requirement for the next year before making deposits under SCSS.

On investment in the SCSS, Solanki said, "One can deposit only up to Rs 15 lakh under this scheme either by opening a single or a joint account. Since for determining eligibility to open the account under this scheme the age of the first holder is only considered, the spouse can be added as a joint holder even if he/she has not completed the required age. The deposits within the overall limit can be made either in one single account or in multiple accounts."

Batting for bank bonds ahead of the SCSS Kartik Jhaveri of Transcend Consultants said, "In SCSS, one can't invest above Rs 15 lakhs while in bank bonds, one can invest up to any level."