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The decision, which follows a Budget announcement, is expected to provide more investment elbow room for the middle class as the investment cap has been fixed for every senior citizen instead of the earlier rule that capped investment at Rs 7.5 lakh per family. The financial inclusion scheme, where investments were earlier allowed till May 4 has also been extended up to March 2020.
The principal will be returned after ten years. The scheme is operated through LIC India and so far over 2.2 lakh senior citizens have benefitted from it. An earlier scheme called Varishtha Pension Bima Yojana-2014 had received subscription from 3.1 lakh senior citizens. The scheme aims to protect seniors from the vagaries of falling interest rates and offers assured pension based on a guaranteed rate of return of 8% per annum for ten years, with an option to opt for monthly, quarterly, half-yearly or annual pension.
On fixed deposits, SBI currently offers a maximum 7.25% to senior citizens if they invest for five to 10 years. Financial experts said the assured return was a major plus but on the flip side, the money was locked in for a decade.
“It is not a bad investment. Compared to a fixed deposit it fetches higher returns, offers regular income for 10 years and will be attractive for those in the lower tax brackets,” said financial planner Surya Bhatia. Income from annuities of pension plans such as Pradhan Mantri Vaya Vandan Yojana are taxable. Mumbai-based financial planner Gaurav Mashruwala added that investors should look at other options before deciding on where to park their money. “You have to see if it helps achieve your goals and what are the comparable options,” he said.