2020 is probably one of the most challenging times to choose the perfect financial plans, particularly for senior citizens. When you are young, you have enough time horizon as well as risk appetite. On the other hand, when you are close to retirement or have already crossed the 60s, you cannot risk the capital at all. What one needs in a Senior Citizen Saving Plan is a Risk-Adjusted Return steadily month on month through the life span.
Senior Citizen Fixed Deposits with banks, Post office Senior Citizen Saving Scheme, and LIC’s Pradhan Mantri Vaya Vandana Yojana 2020 are three of the best saving options for seniors. Amid COVID 19 uncertainties where debt mutual funds have lost the sheen, it is imperative to compare these senior citizen products and find out which is the best saving option for pensioners and retired professionals.
Any day the peace of mind that comes with FDs is incomparable, however in the falling rate regime, returns are lowering. Despite the launch of special Senior Citizen FD schemes by SBI, HDFC, and ICICI Banks, the effective returns are low in the face of lowered overall FD rates.
Product | Tenor (in years) | Max Returns | Type | Quantum |
SBI We Care | 5-10 | 6.50 | Fixed Deposit | No Limit |
HDFC Senior Citizen Care | 5-10 | 6.50 | Fixed Deposit | No Limit |
ICICI Bank Golden Years FD | 5-10 | 6.55 | Fixed Deposit | No Limit |
LIC PMVVY | 10 | 7.40 p.m. (7.66 p.a.) | Pension Plan | Max 15 Lakhs |
Post Office Senior Citizen Saving Scheme | 5 year lock-in | 7.40 p.a | Small Saving Scheme | Max 15 Lakhs |
*rates as on 27 May, 2020
Currently ICICI Bank Golden Years FD offers the best rate of return at 6.55 % for senior citizens. All the top banks including SBI, HDFC, and ICICI, have launched limited time special FD schemes for senior citizens. These schemes offer an additional rate of interest as a premium over the regular rate. You can apply online as well as offline and book these schemes to tap these limited-time offers.
At 0.75 to .80 %, additional returns FDs do offer a better rate of return to senior citizens. However, these are not the best savings option. You should use FDs to park money you may need at a fixed date in a near future. Based on your goals and risk appetite, you should use FDs in your kitty. One of the best ways to make the best use of FDs is laddering. Opt for different tenures to make the most.
Also Read: Investing in COVID Times: Dos & Don’ts of Fixed Deposits for Maximum Returns
PMVVY modified 2020 is open to the public from 26 May 2020 for three financial years. The scheme is a 10 year pension plan backed by the GOI and administered through Life Insurance Corp. of India (LIC). The USP of this outstanding investment & pension plan is the highest return for Senior Citizens. The pension benefit is capped at 15 Lakh.
At 7.66% p.a. the rate of interest is better than any of the bank FDs & SCSS. You get the choice to earn interest monthly or annually. The income is however, taxable.
Also Read: LIC Pradhan Mantri Vaya Vandana Yojna 2020: Check Interest Rate & Benefits
SCSS is one of the best small savings schemes for senior citizens. The rate of interest is reduced to 7.40% per annum recently, yet it is an attractive option. The tenor is five years and can be extended by another three years.
The best part is its applicability for tax deduction up to ₹1.5 lakh per annum under Section 80C of the Income-tax Act, 1961.
When compared with PMVVY, the lower tenor and tax benefit make it a more suitable and liquid investment option.