SCSS vs PMVVY vs Debt Funds: What Should Senior Citizens Pick?

Retirement is a new chapter in life, the time to sit back and reap the fruits of years of hard work and financial discipline. However, it is also the time to manage your savings wisely, as your earnings days are behind you. So, the question is: where should you park your hard-earned retirement funds? Should you choose SCSS, PMVVY, or go with debt mutual funds? 

Here, we break down the pros and cons of these options and find which one is the best fit for your financial goals. 

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Senior Citizens' Savings Scheme (SCSS)  

SCSS is the government of India's retirement benefit program. Individuals over 60 years can make an individual or joint investment in this scheme, and you must deposit it in the Senior Citizen Scheme account within a month of receiving retirement benefits from the employer. The minimum amount you can deposit is ₹1,000, and it can go up to ₹30 lakhs. Any additional deposits will be refunded to the account holder. The scheme's tenure is 5 years, and it can be extended for up to 3 years. The current interest rate for the scheme is 8.2% per annum. You can claim a tax deduction under section 80C of the Income Tax Act for the deposit. If the total interest in all SCSS accounts exceeds ₹1 lakh per annum, TDS will be deducted. However, NRIs are not eligible to open an SCSS scheme account.' 

Pradhan Mantri Vaya Vandana Yojana (PMVVY) 

PMVVY is a retirement-cum-pension scheme for senior citizens. The scheme is applicable for Indian citizens above 60 years, and there is no upper age limit for purchasing this scheme. NRIs are also eligible for the scheme. Life Insurance Corporation of India (LIC) is the administrator of PMVVY. The term of the scheme is 10 years, and the interest rate is close to 8% per annum. If you withdraw after one year, 1.5% of the deposit is deducted as a penalty. The minimum and maximum price purchase of the scheme is ₹1.50 Lakh and ₹15 lakh respectively. The scheme is exempt from Service Tax or GST. However the returns are taxable according to the tax slab of the investor.  

Debt Funds 

A debt fund, also known as an income fund, is a fund that primarily invests in bonds or other debt securities. These funds allocate money to both short-term and long-term instruments issued by the government, public financial institutions, and corporations. This includes treasury bills, government securities, debentures, commercial papers, certificates of deposits and more.  

Debt funds have potential for income generation and capital preservation. As per SEBI guidelines, there are four categories of debt funds: short-term debt funds, Fixed maturity plans, Capital protection-oriented funds, and Hybrid funds.  

Which To Choose?

Conclusion 

There is no ideal, one-size-fits-all model when it comes to investing your retirement savings. The right choice depends on your financial goals, risk appetite, and liquidity needs. If safety and guaranteed returns are your priority, and you are ready to wait long term, SCSS and PMVVY offer government backed assurance with steady income and minimal risk.