Retirement planning is crucial for ensuring financial stability during the later years of life. For senior citizens in India, the government provides a variety of schemes that offer financial security and regular income post-retirement. Among the most popular options are the Pradhan Mantri Vaya Vandana Yojana (PMVVY) and the Senior Citizens' Savings Scheme (SCSS). Both schemes are tailored to meet the needs of senior citizens, offering safe, government-backed returns, but they have distinct features that make them suitable for different financial goals.

The Senior Citizens’ Savings Scheme is an income generation plan for eligible senior citizens (and for specified individuals between the ages of 50 and 60 years). If you are eligible for this scheme, you can deposit any amount from Rs. 1,000 to Rs. 30 lakh in your SCSS account.
 

You earn interest on this deposit at the rate specified by the Indian government. The interest is paid out quarterly, on the first working day of January, April, July and October. The Senior Citizens’ Savings Scheme also has a lock-in period of 5 years. At the end of this tenure, you can extend the deposit term for another 3 years if required.
 

Pradhan Mantri Vaya Vandana Yojana

The Pradhan Mantri Vaya Vandana Yojana is a retirement and pension scheme offered by the Life Insurance Corporation of India (LIC). Anyone who has completed 60 years of age is eligible for the policy, which has a tenure of 10 years. The scheme was available till March 31, 2023.
 

To enrol in the scheme, eligible individuals must invest a lump sum amount, known as the purchase price, on which assured returns are offered. The plan pays out pension income at monthly, quarterly, semi-annual or annual intervals. At maturity, the purchase price will be repaid along with the last instalment of the pension.

Differences between SCSS and PMVVY schemes

Benefits of the Senior Citizens’ Savings Scheme

• Regular interest payments: Account holders earn guaranteed quarterly interest at predetermined rates on the deposited amount. This is beneficial for retirees.
• Option to hold multiple accounts: You can hold multiple SCSS accounts, provided the total deposit does not exceed Rs. 30 lakhs. Both single and joint accounts are permitted.
• Option to extend the tenure: The general tenure for the Senior Citizens’ Savings Scheme is 5 years. However, you can extend it for an additional 3 years after that.
• Tax benefits on the deposit: The amount deposited in the SCSS scheme is eligible for tax benefits u/s 80C in the old regime. You can claim up to Rs. 1.5 lakhs as a deduction.
• Premature closure: It is possible to close your account under the SCSS Scheme at any time. However, you will be charged a penalty based on when you close the account.

Benefits of the Pradhan Mantri Vaya Vandana Yojana

The Pradhan Mantri Vaya Vandana Yojana also offers distinct benefits to policyholders enrolled in the scheme. These benefits include:

• Guaranteed pension: The PMVVY scheme offers guaranteed pension to individuals who have enrolled in the scheme at monthly, quarterly, half-yearly or annual intervals.
• Free-look period: The policy comes with a free-look period of 15 days (or 30 days if the policy has been bought online). This facilitates informed decision-making.
• Maturity benefits: If the policyholder survives the policy term, the purchase price will be repaid at maturity along with the last instalment of the pension due.
• Loan against the policy: Policyholders can borrow up to 75% of the purchase price after the end of 3 years from the date of purchase.
• Tax benefits: The amount invested in the Pradhan Mantri Vaya Vandana Yojana scheme is tax-deductible up to Rs. 1.5 lakh u/s 80C (only in the old tax regime).

Eligibility for the Senior Citizens’ Savings Scheme

• Any Indian citizen who has attained 60 years of age
• Any individual who has attained 55 years of age, if they have retired under VRS, superannuation or special VRS schemes
• Any personnel retired from the defence forces if they have attained 50 years of age

Eligible individuals can open accounts either singly or jointly. They can also have more than one SCSS account, but the total amount of deposits in all the accounts combined should not exceed Rs. 30 lakhs.

Eligibility for the Pradhan Mantri Vaya Vandana Yojana

To be eligible for the Pradhan Mantri Vaya Vandana Yojana, individuals must fulfil the following conditions.

• The applicant should be a citizen of India.
• They should have completed 60 years of age at the time of applying for the scheme.
• There is no maximum age for entry to the Pradhan Mantri Vaya Vandana Yojana scheme.
• Eligible persons may receive the following amounts of pension depending on the purchase price paid:
  • Minimum pension: Rs. 1,000 monthly, Rs. 3,000 quarterly, Rs. 6,000 semi-annually or Rs. 12,000 annually
  • Maximum pension: Rs. 9,250 monthly, Rs. 27,750 quarterly, Rs. 55,500 semi-annually or Rs. 1,11,000 annually

Which one should you choose?

Choosing between PMVVY and SCSS depends on your financial needs and preferences:

A. When to choose PMVVY:

• If you prefer long-term stability and are looking for a fixed pension over a period of 10 years.
• If you want flexibility in choosing how often you receive your payouts (monthly, quarterly, etc.).
• If you are looking for a safe investment that guarantees a stable, government-backed income throughout your retirement.

B. When to choose SCSS:

• If you want higher returns and are comfortable with a tenure of five years (extendable by three years).
• If you need regular quarterly income from your investment and want to benefit from Section 80C tax deductions.
• If you want some flexibility for premature withdrawals, though penalties are involved.

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Conclusion

Both Pradhan Mantri Vaya Vandana Yojana (PMVVY) and Senior Citizens’ Savings Scheme (SCSS) are excellent investment options for senior citizens seeking a safe, government-backed way to secure regular income post-retirement. While PMVVY offers more flexibility in payout frequency and a longer tenure, SCSS provides higher returns over a shorter period with tax benefits. Depending on your retirement goals, risk tolerance, and financial needs, you can choose either scheme or invest in both to diversify your retirement portfolio and ensure a stable income.