Old age brings in a lot of new changes, one of them is retirement. After a certain age, a few tasks that seemed easy a couple of years ago starts becoming a burden. During such times when it becomes impossible to earn a salary on a regular basis, pension schemes act as a saviour.
One of the main reasons why retirement can be worry-some is financial instability. People who have spent all their lives earning money, often find the thought of retirement a little uncomfortable. Keeping these factors in mind, the government has launched various schemes to ensure financial stability and security after retirement. Pension schemes are specially designed to provide certain financial coverage after retirement and to reinforce economic development in the nation.
Let’s have a look at some of the best pension schemes for senior citizens:
National Pension Scheme (NPS)
The NPS scheme was launched in the year 2004 by Pension Fund Regulatory and Development Authority of India (PFRDA). This government pension scheme is designed to specifically provide financial security to senior citizens, post-retirement. This scheme allows the subscribers to make a regular contribution to their account while they are working and can avail the benefits of the regular annuity after their retirement. The subscribers can also make a partial withdrawal from the national pension system account in case of an emergency.
The national pension scheme is available for all employees including the public sector, private sector, and even the unorganized sector except those who work in the Armed Forces. The NPS scheme allows its subscribers to make a minimum contribution of Rs. 6000 in a financial year. The amount can be paid as a lump-sum or as a monthly instalment of Rs 500, whatever is more convenient for the subscriber.
- Should be an Indian Citizen
- Minimum eligibility age is 18 years and the maximum age to open the account is 65 years
- Applicant should be a KYC complaint
- Should not have a pre-existing NPS account
Benefits of National Pension Scheme (NPS):
- A part of the contribution made towards the NPS scheme is invested in equities. This means that the scheme offers higher returns as compared to any other conventional tax-saving investment. The interest rate of this plan is 9%-12%, making it the best pension plan in India for individuals who want to collect funds for the long-term, for a better financial security after retirement
- The NPS scheme requires to mandatorily invest until the age of 60. Partial withdrawals are permitted after 3 years from the date of opening the account, in case of an emergency such as – child’s education, purchasing a house, or health related issues. The subscriber can withdraw up to 25% of the total contribution made, 3 times in the interval of 5 years
- To earn a regular annuity from PFRDA registered insurance firm, it is mandatory to keep aside 40% of the accumulated fund. 60% of the remaining fund is tax-free
- The subscribers can choose the option of investment and pension fund as per their needs
- Offers regular monitoring and transparency in investment norms by the PFRDA
- National pension system provides an advantage to investors over other fixed-income schemes and also offers tax exemption under Section 80C and 80CCD of the Income Tax Act
Atal Pension Yojana (APY)
One of the many pension schemes by the government is the Atal Pension Yojana. This government pension scheme aims to provide pension benefits with a minimum contribution per month. The Atal pension scheme is mainly targeted to the unorganised sector and addresses the longevity risks amongst the workers of this sector. The APY scheme encourages the workers to voluntarily save for their retirement by giving minimum contribution on a monthly basis.
- The applicant should come under the low-income group or should not come under the tax bracket
- Suitable for all individuals between the age of 18 – 40 years
Benefits of Atal Pension Scheme:
- APY pension scheme is a social security scheme that enables workers from the unorganised sectors to save for their retirement by contributing a small amount every month
- For every contribution made to the pension fund, the Central Government co-contributes 50% of the total contribution or Rs. 1,000 per annum, whichever is lower. The contribution will be made to each eligible applicant’s account for a minimum period of 5 years. Although, the subscriber needs to contribute for a period of 20 years or more
- On cases such as the death of the contributor, the nominee of the Atal pension scheme can claim accumulated sum or pension money
- APY scheme provides fixed monthly pension between Rs. 1,000 to Rs. 5,000 post retirement
The Pradhan Mantri Vaya Vandana Yojana provides social security and financial independence after retirement by offering an assured rate of return on the investments. This pension scheme is only offered by the Life Insurance Corporation of India (LIC) and provides assured returns for 10 years. According to the 2018-19 budget, the government increased the maximum purchase price to Rs. 15 lakhs.
- Applicant must be an Indian citizen
- Must be above 60 years of age
- Should be ready to avail the policy term of 10 years
Benefits of Pradhan Mantri Vaya Vandana Yojana:
- The Pradhan Mantri Vaya Vandana LIC pension scheme offers the beneficiary an assured return of 8% per annum on the deposit
- The pension or the return will be payable for a period of 10 years, the beneficiary can choose the tenure of payment
- An individual can invest up to Rs. 15 lakhs maximum and Rs. 1000 minimum in this LIC pension scheme
- In a case if the beneficiary dies before the completion of the tenure, the principal amount will be credited to the nominated beneficiary’s account
- In case of critical illness, the beneficiary can opt for premature exit. In such cases 2 per cent penalty charge will be deducted
Indira Gandhi National Old Age Pension Scheme (IGNOAPS)
The government pension schemes for senior citizens play a vital role in providing financial security amongst the elderly while also initiating economic development in certain crucial areas of society. Indira Gandhi National Old Age Pension Scheme is one such pension plans in India. The scheme was introduced by the Ministry of Rural Development of India in 2007 and is popularly known as the National Social Assistance Programme (NSAP). The main aim of this scheme is to provide social protection to its beneficiaries by providing senior citizen pension, widow pension and pensions for disabled people.
- Applicant should be 60 years of age or higher
- The applicant should come under the low-income or below poverty line group
- Must not have any regular source of financial support from family members or other sources
Benefits of Indira Gandhi National Old Age Pension Scheme (IGNOAPS)
- The scheme aims at providing financial assistance to senior citizens, widows, and those with disabilities
- IGNOAP scheme provides senior citizens of India a monthly pension
- This scheme is a non-contribution government pension plan which means that the beneficiary does not have to contribute any amount to receive pension
- A beneficiary between the age of 60-79 years will receive a monthly amount of Rs 200. In case the beneficiary is above 80 years of age, he/she will receive am amount of Rs 500
- The pension amount will be credited to the beneficiary’s bank account or post office account
Employee Pension Scheme (EPS)
The EPF pension scheme was introduced by the government in 1995 and is also called as the Employees Pension Scheme 1995. The EPS scheme was launched by the Employee’s Provident Fund Organization (EPFO) and its main aim is to provide social security to the employees. The old pension scheme provides pension to the employees working in the organized sectors during their retirement i.e., after the age of 58 years. The benefits of which can only be availed by employees who have served for a minimum period of 10 years (continuous or non-continuous).
The Different Types of EPS or EPF Pension Scheme:
- Widow pension – Also known as Vridha pension where the widow of the deceased EPFO member is eligible for the pension
- Child pension – In case the EPF member is deceased, their surviving children become applicable to receive the monthly pension until the child turns 25 years old
- Orphan pension – In case the EPF member dies and does not have a surviving widow, the children of the member receive a pension under the orphan EPF pension scheme
- Reduced pension – The member of the EPF pension scheme can withdraw an early pension if he/she has attained the age of 50 but are less than 58 years old, only if they have made an active contribution for 10 years or more. In this case, the pension value is reduced to 4% rate per year
- Must be an EPFO member
- Must complete 10 years of active service with equal years of active contribution towards the scheme
- Should be 58 years or above
Benefits of Employee Pension Scheme (EPS)
- Provides social security to the employees
- Pension is provided to the employees working in the organized sectors during their retirement or after the age of 58 years
- The EPS pension scheme allows certain arrangements for a member who wants to withdraw the pension funds early
- EPFO account can be transferred to the widow or children of the member in case the beneficiary dies
Varishtha Pension Bima Yojana is a government pension scheme that offers income security as well as a guaranteed rate of return. It provides annuity pay-outs to senior citizens in the form of an Immediate Annuity Plan. This scheme is also known as LIC Varishtha Pension Bima Yojana since it is implemented through Life Insurance Corporation of India. In the scheme, the member needs to pay the premium of their choice at the beginning of the policy. Once this premium is paid, they are eligible for a regular pension. The Varishtha Pension Bima Yojana offers an assured pension based on a guaranteed rate of return of 8% per annum, for a period of 10 years. Here, the member can opt for the pension on a monthly, quarterly, half-yearly or annual basis.
- Available for citizens aged 60 years and above
- No limit on the maximum age for this pension
Benefits of Varishtha Pension Bima Yojana:
- All payments under this policy are made by NEFT or ECS
- Offers an assured pension with a guaranteed interest rate of 8% per annum, which is higher than most of the other senior citizen pension schemes
- Different pay-out modes available for receiving pension i.e. monthly, quarterly, semi-yearly or yearly
- Free-look period of 15 days available from the date of receipt of the policy. In case the member wishes to withdraw from the scheme, the premium amount will be refunded (after deduction of stamp duty charges)
- The premiums paid under this policy are tax exempted under Section 80C of the Income Tax Act
- A member can apply for a loan against the LIC Varishtha Pension Bima Yojana after a period of 3 years. The amount of loan offered will be up to 75% of the policy amount
- In case the policyholder dies, then the premium payment will be refunded to the spouse/nominee