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Retirement Planning: 4 Government-Backed Pension Plans

Retirement years are righty called the golden years, when one may spend some of the best years of one's life. Therefore, it is vital to plan properly for retirement.

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Meghna Maiti
March 4, 2023
Retirement Planning: 4 Government-Backed Pension Plans

Retirement planning is an integral part of financial planning for any individual. “Expenses during retirement only tend to go up. While some expenses, such as commuting and formal clothes, may come down, others might shoot up. Hence it’s important to do retirement planning that can offer a regular income after retirement,” says Renu Maheswari, chief executive officer and principal advisor, Finzscholarz Wealth Manager, and a Sebi-registered investment advisor. While there are several retirement plans available, the ones offered by the government are considered safer. We take a look at four government-backed pension plans. 

Senior Citizen’s Savings Scheme: As the name suggests, this scheme can be availed by those above 60 years old. Those who have taken voluntary retirement between 55 and 60 years can also invest in this scheme. A minimum of Rs 1,000 and a maximum of Rs 15 lakh can be invested in the plan. The interest rate applicable from the first quarter of 2023 is eight per cent. Interest is paid quarterly.

National Pension Scheme: This scheme lets people regularly invest in a pension account during their employment. After retirement, the subscriber can take out a certain amount from the corpus (60 per cent), and the rest can be received as a monthly pension after retirement. Most of the fund investment is invested in the market, and one can expect to get returns between eight and 10 per cent. Subscribers can either opt for ‘auto choice’ if they find it difficult to decide and an active choice if they want to choose the fund manager and scheme. The NPS also allows partial withdrawals after one completes five years. 

Pradhan Mantri Vaya Vandana Yojana: PMVY is an insurance policy-cum-pension scheme that provides security to senior citizens. This pension plan is provided by Life Insurance Corporation (LIC), which caters to one’s need for post-retirement financial planning. Here a senior citizen can invest up to Rs 15 lakh. These schemes will be accepted till March 31, 2023. The PMVY scheme guarantees an interest of 7.4 per cent for 10 years. The subscriber can receive a pension monthly, quarterly, semi-annually, or annually. When purchasing this plan, a buyer can select between the purchase price and the pension amount. The policy can be purchased with an annual pension option for a minimum of Rs 1,56,658 (for a Rs 12,000 annual pension) and a maximum of Rs 14,49,086 (for Rs 1,11,000 annual pension).

Atal Pension Yojana: This voluntary retirement scheme is for those between 25-40 years of age and targets middle- and low-income individuals. The government contributes 50 per cent of the deposit for five years. The beneficiary starts receiving the proceeds after 60 years. The monthly pension amount is receivable in Rs 1,000, Rs 2,000, Rs 3,000, and Rs 5,000 slabs. It is determined as per the subscriber’s age, the day of joining the APY scheme, and the pension amount opted by the subscriber.

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