Retirement Income Stream: Small Savings Scheme

Retirement Income Stream: Small Savings Scheme

by 5paisa Research Team Last Updated: 2022-04-04T13:50:49+05:30

Attraction of Small Savings Schemes lies in many factors such as returns linked with the yields of government securities, instruments under these schemes provide fixed returns along with the safety of investors' capital.

The process of retirement planning is an essential aspect of every individual’s life, as it decides what type of standard of living you will have during your sunset years. The process of retirement planning undertaken by an individual will result in a benefit at a later stage of life.

In this article, we will look at various small savings schemes available, where an investor can invest for his retirement.

Small savings schemes are designed to provide safe and attractive investment options for an individual. These schemes are operated through a large number of post offices and public sector banks spread throughout the country. They have been a great mode of savings for many people. Even high net worth individuals dedicate some proportion of their portfolio towards these schemes in order to have stability in their portfolio.

What are the investment instruments available under the small savings scheme? 

  • Post Office Time Deposits: The post office time deposit is similar to normal fixed deposits banks offer, where you save money for a definite time period, earning a guaranteed return through the tenure of the deposit. The objective of this savings scheme is to protect the capital of an investor. In case of the unfortunate demise of the investor, the account can be continued or closed. If closed, interest is paid as if the account was closed prematurely. The current rates compounded quarterly but paid annually or at maturity, are mentioned below.


Rate of interest  

1-Year Time Deposit  


2-Year Time Deposit  


3-Year Time Deposit  


5-Year Time Deposit   


  • Post Office Monthly Income Scheme (POMIS): The Post Office Monthly Income Scheme (MIS) is a low-risk investment scheme offering steady income and, hence, is suited for conservative investors and senior citizens. This scheme is government-backed, which is why its the safest investment instrument. It is one of the small savings investment schemes wherein you can start investing with a minimal amount of Rs 1000. The prevailing rate of interest on POMIS is 6.6% compounded monthly.

  • National Savings Certificate (NSC): NSC is the only scheme wherein not only the initial deposit but also the interest for the four years, out of its term of five years, and also enjoys the deduction u/s80C. There is no upper limit on the amount of investment. The certificates are available in the denominations of Rs 100, Rs 500, Rs 1,000 and Rs 10,000. The prevailing interest rate of NSC is 6.8% compounded annually.

  • Kisan Vikas Patra (KVP): Any Indian citizen above 18 years can purchase KVP. Minimum investment id Rs 1,000 and there is no upper limit specified. The deposit shall mature on the maturity period prescribed by the Ministry of Finance from time to time as applicable on the date of deposit. Any number of accounts can be opened under the scheme. The prevailing interest rate of the scheme is 6.9% compounded annually.

  • Public Provident Fund (PPF): The PPF account can be operated by any individual, either on his own behalf or on behalf of a minor of whom he is the guardian or on behalf of Hindu Undivided Family (HUF). The minimum annual investment required is only Rs 500 per annum, giving the investor freedom to invest as per his discretion and available resources. The maximum annual limit of investment is Rs 1,50,000 per annum. An investor has to at least invest a minimum amount every year in his account in order to keep the PPF account active. PPF have a lock-in period of 15 years. On maturity, the investor has the option of withdrawing the proceeds and close the account or extend the account for a block of five years or continue without contribution. The prevailing interest of this scheme is 7.1% compounded annually.

Final Thoughts

An individual should assess their investment requirement and investment horizon and then further decide to invest in these schemes as they offer a variety of options along with different benefits.

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