World senior citizen day: From PPF to NPS, six government backed pension schemes you must know about

Nothing is more important than having a regular monthly income during retirement. The government of India offers multiple pension schemes that you can avail of, both to build a retirement corpus in your younger years and to invest during your golden years.

Here are government-backed investment options for senior citizens that you must know of.

Atal Pension Yojana (APY)

While there are many pension programs in India, only a handful benefit low-income populations, particularly employees in the unorganised sector. The APY is one of them. This government-backed pension program encourages labourers and workers to save for retirement by making a small monthly contribution.

Under this scheme, five pension plan slabs -- ₹ 1000, ₹ 2000, ₹ 3000, ₹ 4000, and ₹ 5000 -- are available, assured by the Government of India, to its subscribers at the age of 60 years, based on the contributions the subscribers make.

Below are the eligibility criteria:

• The subscriber's age must fall between 18 and 40 years old.
• They must have a savings account with a bank or a post office savings account.

National Pension Scheme (NPS)

NPS is a voluntary contribution-based pension program especially curated to give financial stability to senior citizens after retirement. It offers subscribers inflation-adjusted returns and allows them to contribute periodic payments into their NPS account during their period of employment. The NPS requires users to make investments in the scheme until they are 60 years old. Partial withdrawals are permitted three years after opening an account, but only for specific reasons such as property purchases, children's education, or medical costs, and up to 25% of the entire contribution made. After retirement age, the subscriber may withdraw as much as 60% of their accumulated investment in lump sum amounts or in instalments. The remaining 40% must be utilised to buy an annuity. Lump-sum withdrawals are tax-deductible.

Public Provident Fund (PPF)

PPF is a long-term investment plan well known among individuals wanting high but secure returns. Individuals who open a PPF account aim to keep the principal sum safe. When opening a PPF account, the account is set up for the applicant, allowing monthly deposits, and the interest on the deposits is compounded.

It involves a 15-year investment lock-in period before funds can be completely withdrawn. This period can be extended by an additional five years if needed. Subscribers can invest from ₹ 500 to ₹ 1.5 lakh annually, with the benefit of obtaining loans against the amount invested. All Indian citizens, including minors (whose accounts are handled by a parent/guardian), can open PPF accounts. The current interest rate is 7.1%, which can be changed quarterly by the government.

Employee Provident Fund (EPF)

EPF is a widely recognised retirement savings scheme launched by the Employee Provident Fund Organisation (EPFO) under the guidance of the Government of India for all salaried employees.

Under this scheme, both the employer and employee contribute 12% of the employee's dearness allowance and base salary to the EPF account.

The present interest rate on the deposits to the EPF is 8.5% per year. The EPF's interest earned is taxation free and can be withdrawn without penalty. Employees who retire receive a lump-sum payment that includes all the interest they have earned.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

PMVVY is a government-backed pension program for senior citizens that provides individuals with financial freedom upon retirement through investment returns. The policy is exclusively offered by the LIC and offers assured annual returns of 8% on their deposits for ten years.

The minimum eligibility age for this scheme is minimum 60 years. they can invest ₹ 100 to ₹ 15 lakhs in the PMVVY pension scheme and choose from monthly, quarterly, semi-annual, and annual payments with a maximum pension of ₹ 10,000, ₹ 30,000, ₹ 60,000, and ₹ 1,20,000, respectively.

If the individual dies before the plan expires, the principal amount will be added to the nominee's account. Early withdrawal is allowed only if there is a serious disease, with a 2% penalty.

Varishtha Pension Bima Yojana (VPBY)

VBPY is a government-backed initiative, operated by the LIC that combines insurance with a pension plan. This scheme is especially for senior citizens above 60 years of age and provides financial stability with annuity payments to the senior citizens through an immediate annuity plan.

The individual pays their premium at the beginning of the policy. Once the premium is paid, they become eligible for a regular pension. This scheme provides an assured pension based on 8% annual returns over ten years. This pension program for elder citizens allows individuals to choose their premium payment method; they can get their pensions every month, quarterly, semi-annually, or annually.

Conclusion

Preparing for retirement is an important step for financial security. The various government-backed pension schemes discussed above provide solutions adapted to senior citizen's varying needs. In addition to the above pension schemes, fixed deposits, the Senior Citizens Savings Scheme (SCSS), and the Post Office Monthly Income Scheme (POMIS) are also great options for people looking for assured returns and financial security in retirement.