Senior citizens are typically risk-averse and, therefore, prefer guaranteed options for their investment in order to keep their money safe. They prefer schemes where they know the return on investment and so, prefer not to follow the adage ‘No Risk, No Gain’. They would rather want their money safe than invest in risky instruments for getting higher returns.
Small savings schemes offered by the post office are among those few instruments that have been in existence for long enough to build trust among investors. This also makes them very popular with senior citizens for their simplicity and guaranteed returns.
Small Savings Schemes
Here are a list of small savings schemes that seniors could invest in for getting assured returns in their retirement years.
Post Office Monthly Income Account (MIS): This scheme provides income in the form of a monthly interest on the investment made. The minimum investment amount is Rs 1,000 and the maximum amount is Rs 9 lakh in a single account and Rs 15 lakh for a joint account.
Senior Citizen Savings Scheme (SCSS): This scheme is specifically designed for senior citizens and pays interest on a quarterly basis. The minimum investment amount in SCSS is Rs 1,000, and the maximum amount is Rs 30 lakh.
National Savings Certificate (NSC): This is a five-year investment plan where the interest is compounded annually and paid on maturity. NSC can be taken in the name of anybody aged above 10 years. The minimum investment amount is Rs 1,000, and in multiples of Rs 100, with no maximum limit.
Public Provident Fund (PPF): This is among the most sought-after scheme because of the exempt-exempt-exempt (EEE) tax benefits. However, in the new tax regime, investment in PPF will not provide any tax benefits. Yet, this is a long-term guaranteed return scheme that one can start with a minimum investment of Rs 500 and a maximum investment of Rs 1.5 lakh in a financial year. The interest is compounded annually.
Kisan Vikas Patra (KVP): KVP doubles the investment amount in 115 months, which is 9 years and seven months. Here also, the interest is compounded annually. The minimum investment amount is Rs. 1,000 and there is no maximum limit.
Mahila Samman Savings Certificate (MSSC): This is the newest scheme in the small savings portfolio launched by the government in Budget FY2023-24, focusing on women.
A woman or a guardian on her behalf can open this account with a minimum investment of Rs 1,000 and a maximum investment of Rs 2 lakh. Interest is paid quarterly. Until June 2023, this was available only with the post office, but now, few banks have also started offering the scheme.
Sukanya Samriddhi Yojana: Designed for the girl child, this account can be opened by the guardian for a girl child below 10 years of age. It can be opened for a maximum of two girls in a family. The minimum amount of investment is Rs 250, and the maximum limit permissible is Rs 1.5 lakh in a financial year. The interest is compounded annually.
FDs With Bank And Post Office: The post office offers fixed deposits (FDs) for different tenures from 1-5 years. Likewise, banks also offer FDs, but for different tenures starting from seven days to up to 10 years. Typically, banks offer a rate of interest 0.50 per cent (50 basis points) higher to senior citizens over the card rate available to the public. Small finance banks (SFBs) generally offer higher rates than scheduled commercial banks.
Government Securities: Government securities (G-Sec) are also an investment instrument one may consider for earning guaranteed returns. These are issued both by the central and the state governments. G-Secs typically do not carry any risk of default and, are hence also called ‘risk-free gilt-edged instruments’.
These are available in both short-term (maturity in less than one year) and long-term (maturity more than one year or more).
The central government issues both short-term (treasury bills), and long-term (bonds or dated securities, while state governments issue only long-term securities, also known as state development loans (SDLs). One can buy or sell these securities from the primary as well as the secondary markets, through their brokers, or the Reserve Bank of India (RBI) Retail Direct portal.