SCSS vs PMVVY
New Delhi: Seniors mainly prefer risk-free instruments to park their retirement savings. This is the reason why they mainly opt for fixed bank deposits to get regular income after retirement. However, since interest rates on term deposits have fallen significantly due to the RBI’s 115 basis point repo rate cut by the RBI over the past year, bank FDs do not appear to be. more attractive to seniors.
The State Bank of India, the country’s largest lender, now offers between 2.9% and 5.4% interest on its term deposits with terms of between one and 10 years. As seniors are predominantly dependent on interest income, their income has fallen by up to 30% over the past year, making it difficult for them to manage their expenses.
In such a situation, seniors began to consider other return-assured options like the Senior Citizen Saving Scheme (SCSS) and Pradhan Mantri Vaya Vandana Yojana (PMVVY) to earn higher fixed interest.
Seniors Savings Plan
One can invest a maximum of Rs 15 lakh in SCSS in multiples of Rs 1,000. Interest in this scheme is payable quarterly so that it can meet the requirement of regular income. The SCSS account expires in five years, after which it can be extended once for a block of three years.
Despite a sharp drop in interest rates for small savings plans, SCSS still offers a rate of 7.4% for the current April-June quarter, well above any other fixed income plan available to seniors.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
The pension plan is valid for 10 years and the retiree can choose a monthly, quarterly, semi-annual or annual retirement method. Now the interest in the Pradhan Mantri Vaya Vandana Yojana (PMVVY) is higher than the fixed deposit system offered by SBI. The plan will offer a guaranteed rate of return of 7.40% in the monthly interest payment method. If you invest in this pension plan during the year, a return of 7.40% will be locked in for the entire ten year term.
Anyone aged 60 or over can enjoy the benefits of the Pradhan Mantri Vaya Vandana Yojana (PMVVY) program. The maximum investment allowed in this program is Rs 15 lakh. This pension plan is marketed by Life Insurance Corp. of India.
SCSS or PMVVY: Which is better?
While PMVVY and the SCSS plan currently offer an interest rate of 7.4%, in PMVVY your returns are locked in for the entire 10-year term after you buy it. In SCSS the investment period is five years, but in PMVVY the investment period is 10 years, providing a guaranteed return for a longer duration. However, when it comes to liquidity, SCSS has better liquidity than PMVVY. In PMVVY, one cannot withdraw money before 10 years of maturity whereas in the case of SCSS, an investor can withdraw money prematurely by paying a penalty.
Another difference between these two schemes is that in SCSS you can start investing after reaching the age of 55, while in PMVVY you have to be 60 to be able to invest.