Spotlight is now on the burning need for effective retirement products for elderly in the country after the Life Insurance Corporation of India (LIC) launched its Saral Pension Scheme aimed at safeguarding financial interests of senior citizens in India.
This populace is only set to grow, even triple by 2050, if he Longitudinal Ageing Study of India (LASI) is to be believed. While the 2011 population census pegged the number of senior citizens at 103 million, or around 8.6 percent of the population, the figure is estimated to grow around 3 percent annually to reach almost 320 million in the next three decades.
Moreover, per a collaborative report prepared by the International Institute of Population Sciences (IIPL), around 75 percent of senior citizens are likely to suffer from a chronic disease, 40 percent from disability issues, and 20 percent from mental health problems.
Further, senior citizens, specifically those aged 60 and above, accounted for around 63 percent of all COVID-19 related deaths in the country. All this makes it imperative to provide financial aid to this section of society.
Pension and group funds have steadily seen a rise in their market share as well. According to the IRDAI's Indian Insurance handbook, assets under management (AUM) for these schemes rose from a paltry 17.25 percent in 2014 to almost 23 percent in 2020. For FY'19-20, pension, group, and general annuity funds had a total of Rs 898,045 crore under regulation.
Viral Bhatt, Founder, MoneyMantra, advises diversification and maintenance of liquidity while investing for retirement. “It is important to adequately provide for retirement while factoring in your taxable interest income and various exemptions. Options like SCSS, Floating Bonds, Conservative funds can make for good investment avenues for senior citizens,” he said.
Here are five pension schemes that one can check out:
LIC Saral Pension Scheme A non-linked, non-participating, single premium, individual immediate annuity plan, the scheme is open for individuals between 40-80 years. While the minimum purchase price is set at Rs 12,000, with payments that can be made monthly, quarterly, half-yearly, or annual, there is no ceiling on the maximum purchase price.
There are two options that the scheme holders can avail:
- Life Annuity with 100 percent return of purchase price on individual’s death
- Joint life last survivor annuity with 100 percent return of purchase price on death of the last of the survivors.
NPS is one of the most popular, tax-friendly schemes that senior citizens can opt for. There is a fund withdrawal option after three years of complete service, which cannot exceed three times during the tenure of NPS.
Premature withdrawals are capped at 25 percent of the entire corpus. Tax-free withdrawals are also possible in special circumstances like house construction and various other conditions.
APY (Atal Pension Yojana)
This inclusive pension cum retirement scheme is available for all Indian citizens between the ages of 18-40. And post 60 years of age, the exiting pensioner will be permitted to withdraw 100 percent of pension wealth.
Aimed towards bringing the marginalised and lower-income strata of the society, this also brings in the co-contribution of the government, with their addition standing at Rs 1,000 per annum or 50 percent of the subscribers' contribution, whichever is lower. But this co-contribution facility is only available for those who are not covered under any other security schemes.
Under the scheme, the government will also co-contribute 50 percent of the subscriber’s contribution or Rs 1,000 per annum, whichever is lower. Government co-contribution is available for those who are not covered by any Statutory Social Security Schemes and are not the income taxpayer.
PMVVY (Pradhan Mantri Vaya Vandana Yojana)
PMVVY offers a guaranteed pension rate of 7.4 percent monthly for a period of 10 years, thus making it a viable option for senior citizens looking for a regular income stream with fixed benefits.
The scheme fares well from a liquidity perspective since 75 percent of the amount is available as a loan after three years of deposit. In case of any unpaid loans, the amount will be set against the principal. However, it is noteworthy that the scheme comes with no tax benefits.
SCSS (Senior Citizen Savings Scheme)
A scheme that offers inflation-beating returns at 7.4 percent per annum, SCSS allows you to start as low as Rs 1,000, with a starting tenure of five years and a subsequent extension of three years. The scheme is open for all citizens above 60 years of age.
However, your maximum invested amount cannot exceed Rs 1,500,000, with interest received subject to taxation under Section 80C.
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