While choosing between SBI special FD and PMVVY, what will be the better investment option for senior citizens? Find out
New Delhi: Senior citizens mainly depend on fixed deposit or annuity schemes for their regular expenses post-retirement. State Bank of India, the country’s biggest lender, earlier this month, launched a special fixed deposit scheme – SBI ‘We care’ – for senior citizens to provide them a higher interest rate in the current situation where interest rates across the country are falling.
The Life Insurance Corporation of India (LIC) recently modified the interest rates of Pradhan Mantri Vaya Vandana Yojana (PMVVY). Launched in 2017, this pension scheme for senior citizens will attract a fixed interest rate for FY 2020-21. While choosing between the two, what will be the better investment option for senior citizens? Find out
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
PMVVY, which had earlier closed on March 31, 2020, was extended by the government for another three financial years till March 2023. The biggest change in the new PMVVY scheme is the interest rate on this scheme will keep on changing every financial year.
This pension scheme has a tenor of 10 years. You can choose monthly, quarterly, half-yearly or yearly modes of pension. If you invest in the PMVVY scheme before March 31, 2021, the government has declared an interest rate of 7.4% payable monthly. If you opt for annual pension mode, you will get 7.66% per annum for the entire duration of ten years. For investments made in the next two financial years – FY2021-22 and FY2022-23 – the interest rate will be declared at the start of each financial year.
This pension scheme is exclusively marketed by LIC in both offline and online mode.
The maximum investment that can be made in PMVVY is restricted to Rs 15 lakh per senior citizen and the maximum monthly pension in PMVVY is Rs 9,250 per person. If both spouses are above age 60, they can draw a maximum monthly pension of Rs 18,500 by investing Rs 30 lakh. This pension is not dependent on the age of the pensioner.
Here are the details you need to know about PMVVY scheme:
| Yearly pension mode | Minimum investment:Â Rs 1,56,658 Maximum investment:Â Rs 14,49,086 The minimum pension per year is Rs.12,000 while the maximum pension is Rs 1.10 lakh |
| Half-yearly pension mode | Minimum investment:Â Rs 1,59,574 Maximum investment:Â Rs 14,76,064 The minimum pension per half-year is Rs.6,000 while the maximum pension is Rs. 55,500 |
| Quarterly pension mode | Minimum investment:Â Rs Rs 1,61,074 Maximum investment:Â Rs 14,89,933 The minimum pension per quarter is Rs. 3,000 while the maximum pension is Rs. 27,75 |
| Monthly pension mode | Minimum investment: Rs 1,62,162 Maximum investment: Rs 15,00,000 The minimum pension per month is Rs. 1,000 and the maximum pension is Rs 9,250 |
Premature withdrawal: It is allowed in case of medical emergencies. If the pensioner or his/her spouse suffers from a terminal illness or critical illness, pre-mature withdrawal is allowed. In such cases, 98% of the purchase price is paid back to the policyholders.
SBI Wecare FD scheme
SBI Wecare Deposit, the scheme provides an additional 30 basis points interest to senior citizens on their term deposits. However, the tenor of such deposits must be at least 5 years.
At present, the bank offers 6.2% interest rate, which is lower than the government-backed pension scheme. The special FD scheme does not offer any additional tax benefits. One can invest in SBI Wecare FD scheme for a minimum of five years and a maximum period of 10 years.
If one opts for premature withdrawal of a FD under the scheme, the investment will fetch only 5.8% interest rate. Customers have time till December 31 to invest in SBI Wecare FD scheme.
Only resident senior citizens aged sixty years and above are eligible for the scheme.
