6 Drawbacks Of Senior Citizens Savings Scheme (SCSS) You Should Know
Here are six disadvantages of investing in a senior citizen savings scheme (SCSS).
Here are six disadvantages of investing in a senior citizen savings scheme (SCSS).
Senior Citizens Savings Scheme (SCSS)
Advertisement
The government-backed Senior Citizens Savings Scheme (SCSS) helps people aged 60 and above to secure a stable cash flow after retirement when income from salary or other avenues stops or declines. SCSS provides competitive interest rates quarterly, which are fixed and guaranteed. However, potential investors should be aware of certain inherent drawbacks in the scheme.
Also Read: ITR Filing: When Do You Need To File Form 10-IEA? Know Steps To Fill The Form
Advertisement
Here are six drawbacks of the SCSS scheme:
Advertisement
Only citizens aged 60 and above are allowed to create an SCSS account. This age requirement implies that an individual who wishes to retire early cannot take advantage of the scheme.
The liquidity issue is a significant concern for retirees needing access to their funds for unexpected circumstances, like medical problems or shifting financial responsibilities. The plan’s strict five-year lock-in restricts partial withdrawals, although it allows premature exits.
Although SCSS has a maximum investment limit of Rs 30 lakh, this may be a limiting factor for those who can invest more for additional income. Nevertheless, individuals are allowed to open multiple SCSS accounts. However, managing several accounts can be inconvenient for investors.
The SCSS’s interest income is taxable as per the tax slabs. However, retirement savings plans like bonds and the Public Provident Fund (PPF) offer tax exemptions. This tax burden may require complex tax planning and compliance for older individuals.
Also Read: How To Make Smartphones Easy-To-Use For Seniors? 5 Things Can Make Their Lives Easier
Compounding interest is crucial for long-term wealth creation. However, the SCSS’s interest rate is computed only on the principal amount, not on accrued interest, reducing its overall return potential compared to compound interest alternatives. Compounded and simple interest can yield different returns over long periods. The SCSS’s straightforward interest structure disadvantages individuals who want to maximise profits by reinvesting the interest component.
Private banks and investment platforms cannot offer the SCSS, which is only accessible through post offices and designated government-run banks. Its limited access can be an issue for some investors who may want to avoid travelling long distances to subscribe to the scheme or via the online route.
The scheme prevents individual from transferring their account to another person, which could be an issue if the transfer is necessary due to changes in financial situation, or emergencies.
Advertisement
One out of three in urban West India have invested in a term plan; Mumbai tops in financial protection quotient amongst metros, with 100 per cent awareness of life insurance solutions
The Rajasthan government provides pensions to senior citizens, widows, and disabled people under the Rajasthan Social Security Pension (RAJSSP) scheme.
DoPPW has issued a notification on January 1, 2024, about family pensions, allowing women government employees to nominate their children instead of their husbands for family pension. Read on to know more
Get all the latest stories delivered to your inbox
Advertisement
Get all the latest stories delivered to your inbox