Long -Term Income for Retirement in India

Table of Contents

According to the latest World Bank data, life expectancy in India has risen from 53-54 years in 1980 to 67-70 years in 2015. Living longer has a direct impact on your financial preparedness for retirement. While many will have an accumulated pension to fall back on, the truth is an annual price rise or inflation of 5-6% combined with the prospect of potentially living for another 20-25 years post retirement can become an expensive outcome.

1. National Pension System (NPS)

National Pension System (NPS) is a low cost, tax-efficient and flexible retirement savings scheme launched by the government of India. It is one of the saving schemes where you can invest money monthly or through a systematic saving plan during your working life to get an adequate retirement income. All Indian citizens of 18 to 60 years of age, including NRIs are eligible to apply for a pension fund account.

You can choose the investment mix between equity -high risk with high returns, mainly debt-medium risk and returns and pure debt or G -which offer low returns but very little risks. Equity investment is capped at 50%.

There is also an Auto Choice, where the debt-equity mix varies, depending on the age of the subscriber. The investment option can be changed annually.

The funds are locked in till you are 60 years and on retirement, you are entitled to a lump sum payment, with at least 40% used to buy annuities that will earn a monthly pension.

2. Senior Citizens Savings Scheme (SCSS)

This saving scheme option is exclusive to senior citizens in India. Ideally, the applicant must be 60 years or more but those between the ages of 55-60 years, are retired or have opted for VRS, can also apply, provided that the account is opened within one month of the receipt of their retirement benefits.

Investing in SCSS is a very good opportunity for senior citizens above 60 years to make money. This is an effective & long term saving option which offers security and features that are usually associated with any government-sponsored savings or investment scheme. These schemes are available through certified banks and post offices across India.

3. Atal Pension Yojana (APY)

While there are many pension schemes in India, not many of them benefit the low-income groups, especially the employees from the unorganised sector. But Atal Pension Yojana is an exception. This is a government-sponsored pension scheme that encourages the workers and labourers to voluntarily save towards their retirement by making a small contribution every month. APY is a social security scheme that allows the workers from the unorganised sector to secure their future by contributing a small amount through their working years.

For every contribution made by the subscribers, the central government an additional 50% of the total contribution or Rs. 1000 per annum, whichever is lower. The contribution is made to all the APY subscribers’ accounts for five years.

4. Pradhan Mantri Vaya Vandana Yojana

Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a Pension Scheme announced by the Government of India exclusively for the senior citizens aged 60 years and above which was available from 4th May, 2017 to 31st March, 2020. The scheme is now extended up to 31st March, 2023 for a further period of three years beyond 31st March, 2020. 

Interest is paid monthly, quarterly, half-yearly or yearly – as decided by the buyer. Loan is available against the investment. 

The Scheme can be purchased offline as well as online through Life Insurance Corporation (LIC) of India which has been given the sole privilege to operate this Scheme. To buy online, visit http://www.licindia.in/

5. Debt Mutual Fund Schemes 

Debt schemes offer a direct exposure to the wholesale debt market – where most debt securities get traded. The debt scheme fund manager pools money from investors and buys debt papers from various issuers. The investors are given units which are backed by the debt paper assets. The interest earned on the debt papers is reinvested into the scheme, to buy more debt papers.

Although debt schemes do not offer a fixed source of income, the same can be created via systematic withdrawal plans (SWPs). SWPs involve selling a given number of units each month to generate an income source. Debt schemes have dividend option, but it is taxed unfavorably and the dividend income is unpredictable.

6. Varishtha Pension Bima Yojana (VPBY)

Varishtha Pension Bima Yojana is a government pension scheme for senior citizens that offers guaranteed returns and income security. The scheme provides annuity pay-out to the old aged in the form of an immediate annuity plan. The VPBY, which is also known as LIC VPBY, is implemented through LIC, and the individual must pay the premium of their choice at the start of the policy.

Once the premium is paid, they are entitled to get a regular pension. It offers an assured pension based on guaranteed returns of 8% per annum for ten years. This pension scheme for senior citizens gives the individual the option to choose the premium payment mode; they can choose to receive the pension monthly, quarterly, half-yearly or annual basis. The scheme offers individuals a free-look period of 15 days from the date of receiving the policy documents. This means if the member wants to discontinue the policy, they can without incurring any charges.

7. Indira Gandhi National Old Age Pension Scheme (IGNOAPS)

The pension scheme for senior citizens offered by the government of India plays a vital role in securing the financial future of the elderly. The IGNOAPS is one such pension plan in India. It was introduced in 2007 by the Ministry of Rural Development, and it is popularly known as NSAP (National Social Assistance Programme). This scheme’s primary objective is to provide social protection by offering pension to its beneficiaries, including senior citizens, widows, and the disabled.

This pension scheme for senior citizens provides them with a monthly pension to help take care of their old age expenses. It is a non-contribution government pension plan, which means that the beneficiary must not contribute any amount to get the pension. The beneficiaries aged between 60-79 years are entitled to get a monthly pension of Rs. 200, and beneficiaries aged over 80 years get a pension of Rs. 500. The pension amount is directly credited to the beneficiary’s bank account or post office account.