Retirement planning: Five options for an assured

income
financialexpress.com/money/retirement-planning-five-options-for-an-assured-income/2560616/

June 15, 2022

After working for several decades, a retiree looks forward to receiving retirement benefits
that would typically include provident fund amount, gratuity and other superannuation
funds. These retirement funds need to be deployed in such a way that it helps to meet the
regular income requirements in the final years of one’s life. Therefore, a judicious mix of
post-retirement investments is what one must focus on that not only provides a regular
income but also ensures safety and liquidity of money, besides minimising tax liability.

Here are a few investment options for retirees to diversify their retirement kitty.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Exclusively available with Life Insurance Corporation of India (LIC), Pradhan Mantri Vaya
Vandana Yojana (PMVVY) is a one-time lumpsum investment scheme for 10 years with
an option to receive a regular income either monthly, quarterly, half-yearly or annually, in
the form of pension. Anyone above 60 years of age can invest a maximum amount of Rs
15 lakh (Rs 30 lakh along with spouse) in PMVVY. For FY 22-23, the PMVVY will provide
an assured pension of 7.40% per annum payable monthly. This assured rate of pension
shall be payable for the full policy term of 10 years for all the policies purchased till March
31, 2023.

Senior Citizens Saving Scheme (SCSS)

Senior Citizens’ Saving Scheme (SCSS) has
a five-year tenure, which can be further
extended by three years once the scheme matures. One may open more than one SCSS
account but the investment limit for all accounts taken together is `15 lakh. Currently, the
interest rate is 7.4% per annum, payable quarterly and is fully taxable. Investment in
SCSS is eligible for tax benefits under Section 80C and the scheme also allows
premature withdrawals but then the tax benefit gets reversed.

Floating Rate Savings Bond

Floating Rate Savings Bond, 2020 (Taxable) comes with a tenure of seven years. Interest
is paid twice a year, on July 1 and January 1 each year. For Floating Rate Savings Bond,
the rate of interest is equal to the interest rate on NSC plus 0.35%. The interest rate will
keep varying during the tenure of the scheme depending on the interest rate of NSC.
There is no upper limit on investment in Floating Rate Savings Bonds.

Post Office Monthly Income Scheme (POMIS) Account

POMIS is a 5-year investment with a maximum cap of Rs 9
lakh under joint ownership
and Rs 4.5 lakh under single ownership. The interest rate is set each quarter and is
currently at 6.6% per annum, payable monthly. The interest rate remains fixed for the

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entire tenure. The interest earned in POMIS may be credited to a post office savings
account and a mandate may be provided to transfer the funds to recurring deposits in the
same post office.

Bank fixed deposits (FDs)

Currently, interest rates on bank fixed deposit (FD) are around 6.5% and are looking to go
up. Therefore, instead of locking funds for a specific duration, one may spread the
amount across different maturities through ‘laddering’ to manage the ‘re-investment risk’.
When the shortest-term FD matures, renew it for the longest duration and continue the
process as and when various FDs get matured.

Senior citizens get an additional interest of 0.5% per annum on their deposits, while some
banks provide Special Deposits offering much higher rates on specific tenure. For those
retirees looking to save tax as well, the five-year tax saving bank FD could be an option to
consider.

Living on a pension
Pradhan Mantri Vaya
Vandana Yojana purchased in FY22-23 provides an assured
pension of 7.4% per annum for the full policy term of 10 years

For Floating Rate Savings Bond, the rate of interest is equal to the rate of interest of NSC
plus 0.35%

Investment in Senior Citizens Saving Scheme is eligible for Section 80C tax benefits

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