LIC pension scheme for senior citizens vs SBI special FD: Interest rates, tax benefits compared2 min read . Updated: 18 Sep 2020, 08:27 PM IST
- LIC has recently modified the interest rates of Pradhan Mantri Vaya Vandana Yojana
- Amid falling interest rates, what will be the better investment option for senior citizens — PMVVY scheme or SBI Wecare FD? Take a look
Fixed deposits and monthly pension schemes are two most popular investment options for senior citizens. State Bank of India, India's largest lender, has recently launched a fixed deposit scheme — SBI Wecare — especially designed for senior citizens. Good regular returns often make fixed deposits a desirable choice for those who are above the age of 60 years.
The Life Insurance Corporation of India (LIC) has 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. Amid falling interest rates, what will be the better investment option for senior citizens — PMVVY scheme or SBI Wecare FD? Take a look
SBI Wecare FD scheme
Only resident senior citizens aged sixty years and above are eligible for SBI special FD scheme. 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. Under the scheme, the interest rate will be determined against TDS.
Pradhan Mantri Vaya Vandana Yojana or PMVVY scheme:
Any individual who is 60 or above the age of 60 can avail the benefits of Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme. There is no entry age.
The pension scheme has a policy term of 10 years and the pensioner can choose monthly, quarterly, half yearly or yearly mode of pension. Now, the interest in the Pradhan Mantri Vaya Vandana Yojana (PMVVY) is higher than the fixed deposit scheme offered by SBI. The scheme will provide an assured rate of return of 7.40% per annum in FY21. For those investing in this pension scheme in this financial year, it will fetch 7.40% per annum payable monthly interest for entire duration of ten years.
One can buy PMVVY scheme from Life Insurance Corp. of India. This pension scheme is available via both offline and online mode. Senior citizens can draw a minimum pension of ₹1,000 per month depending on the amount invested in the scheme. The maximum pension amount than can be withdrawn is ₹9,250 per month.
One can invest up to ₹15 lakh in this pension scheme. The minimum investment has also been revised. For a pension of ₹12,000 per annum, one should invest at least ₹1,56,658. An investment of ₹1,62,162 can fetch a minimum pension amount of ₹1000 per month under the scheme, according to LIC.
Premature surrender of the PMVVY in case the investor or spouse suffers from terminal illness or critical illness is allowed. In such cases, 98% of the purchase price is paid back to the policyholders. The scheme comes with tax exemptions of up to Rs. 1.5 Lakh on the deposit amount under section 80C.