Retirement planning: Top-5 pension plans

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Senior citizens of the country are mostly dependent on bank fixed deposits for regular income. Nowadays they are facing hard times due to declining interest rates. But for those who are looking for an alternative and want to invest their funds for the long term, pension plans could be a good idea, especially when it is expected that in the long-run inflation and interest rates would fall.

As per 2011 population census report, the number of senior citizens was at 10.3 crore or around 8.6% of the population. The figure is estimated to reach almost 32 crore in the next three decades.

Here are five pension schemes that one can consider for retirement planning:

LIC Saral Pension Plan

It is a non-linked, non-participating, single premium, immediate pension plan and those who are between 40 years to 80 years can opt for this plan. The pension will be lifelong and there is no maximum limit on the amount one can invest.

Two types of immediate annuity options available under this plan:

Option 1 (Single Life): Life Annuity with return of 100% of purchase rate.

Option 2 (joint life): Joint life last survivor annuity with return of 100% of purchase on death of the last survivor.

According to information shared on the LIC’s website, if an individual invests Rs 10 lakh in LIC Saral Pension Plan he or she will earn Rs 51,650 yearly pension that works out to Rs 4,304 per month. In the case of joint life, the yearly pension works out to Rs 51,150.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Pradhan Mantri Vaya Vandana Yojana is an immediate pension scheme, which pays out a pension at the assured rate of return. The scheme is designed specifically for senior citizens, who are above the age of 60 years.

It is currently offering an annual rate of 7.4%. The policy is for the period of 10 years and the maximum you can invest Rs 15 lakh in the scheme.

Loans can be taken from the policy after three years of completion, which will be a maximum of 75% of the invested amount.

Senior Citizen Saving Scheme

Senior Citizens Savings Scheme (SCSS) is one of the most popular investment instruments among senior citizens. It is a government-backed retirement benefits program for those who are above 60 years of age. It offers the highest return at 7.4% per annum payable quarterly subject to maximum limit up to Rs 15 lakh.

The tenure of the scheme is five years. But the account can be extended for further three years.

Apart from senior citizens, retired employees above 55 years of age and below 60 years of age can also apply provided the investment is made within 1 month of receipt of retirement benefits. For defense employees the age limit is above 50 years of age and below 60 years of age.

Atal Pension Yojana 

Atal Pension Yojana (APY) came into effect from June 2015, in order to create a universal social security system for all, especially the poor, under-privileged and the workers in the unorganised sector.

This scheme is available for all Indian citizens between the ages of 18-40.

The subscribers can get pension starting from Rs 1,000 per month to Rs 2,000, Rs 3,000, Rs 4,000 and Rs 5,000 per month after the age of 60 years, depending upon their contribution during the subscription period.

Under the scheme, the government also co-contributes 50% or yearly Rs 1,000 of the subscriber’s contribution, whichever is lower.

National Pension System 

National Pension System (NPS) is one of the most popular tax-friendly government sponsored retirement cum investment schemes. The maximum age to enter the National Pension System has been increased from 65 years to 70 years by the PFRDA.

Through NPS an individual can build a big corpus for himself/herself. Employees working in the government except armed forces staff, private, public, and unorganised sectors can subscribe to this scheme. Investing in NPS can get you extra tax deduction up to Rs 50,000.