The primary objective of the Senior Citizen Savings Scheme (SCSS) is to cater to the post-retirement needs of senior citizens along with the safety of funds and reliability for regular income. It is a stable investment for senior citizens only to earn a higher interest rate on their retirement funds.
Following are the parameters to choose a Senior Citizen Savings Scheme (SCSS) that can be compared with fixed deposits as well:
- A depositor must have attained the age of 60 years or above.
- Individuals who are 55 – 60 years old and opted for a Voluntary Retirement Scheme are allowed to open a Senior Citizen Saving Scheme account. However, it is necessary that they apply for the SCSS within one month of the retirement date.
- Retired defence personnel (except civilian defence employees) are special depositors who can avail this scheme at a minimum age of 50 years, provided they fulfil all other conditions also. It is necessary to meet all eligibility criteria defined by the government.
- Non-residential Indians (NRIs) and Hindu Undivided Family (HUFs) cannot open an SCSS account.
Thus, if you do not fulfill this criteria, you lose out on earning a high interest rate.
So, if you are a non-senior citizen, NRI, HUF, you can focus on an NBFC like Bajaj Finance, and open an FD with various features and a high interest rate of 6.85% for a five year tenor. You can open the FD easily online with uploading of KYC documents.
2. The interest rate
The interest rates on SCSS is subject to change quarterly i.e. after every three months in a financial year. At present, it is 7.4% for 2020-2021 (Q1). It will be revised four times a year according to the rate of interest set by the Reserve Bank of India’s Monetary Planning Committee. The SCSS interest rates based on prevailing market conditions in the country which can be lowered.
However, for a steady stable interest earning, Bajaj Finance Senior Citizen FD rate is fixed for the entire tenor of a fixed deposit till the maturity date. Market conditions cannot affect these FD interest rates. They are offering up to 6.85% interest rate to senior citizens which will be fixed for the entire tenor after opening an FD account.
3. Investment Amount
In an SCSS account, the maximum threshold for investment amount is Rs.15 lakhs that you can invest in the multiples of Rs.1,000. An individual is allowed to invest either Rs.15 lakh or the retirement proceeds received on retirement, whichever is lower because this account is limited to retirement benefits only.
To achieve a similar return which is possible with NBFCs, you can even start investing with smaller amounts of Rs 5,000 in Systematic Deposit Plan from Bajaj Finance where you can keep investing this minimum amount for up to 48 deposits. The maximum you can deposit in a Bajaj Finance FD is Rs 1 crore.
Under SCSS, senior citizens can make a deposit for a lock-in period of 5 years and on the maturity date, it can be extended further to 3 years once. There is no other lock-in period available.
When you have exhausted your tenor with SCSS, you can look at a further investment of tenors from 12-60 months with Bajaj Finance FD.
5. Premature Withdrawal
- Investors can not withdraw funds prematurely before one year of opening the SCSS account.
- After 1 year of opening an account and before the end of 2 years, they can withdraw money at 1.5% withdrawal penalty.
- After 2 years, the penalty charge will be 1%.
- In case, the depositor passes away, there will be no penalty for the premature closure.
Such penalties vary from bank to bank for FD account closures. Bajaj Finance Fixed Deposit can be withdrawn after three months of the opening. And the loan facility against senior citizens FD is also available so that depositors do not have to bear unnecessary penalties. Your FD will keep on earning interest even when you take out a loan.
Evaluate the suitability of the investments as per your potential objectives and take the maximum benefits on your retirement corpus.
Everyone cannot invest in SCSS i.e. Senior Citizen Saving Scheme as it is reserved only for the individuals who are retired. One of the primary eligibility parameters required for this scheme is that you must be at least 60 years of age. Some exceptions are allowed such as retired military personnel can invest in SCSS even if their age is 50 or above. NRIs and HUFs cannot invest in this scheme. The attractive interest rate of SCSS and security of invested capital make it an ideal investment option for many. If you are not a senior citizen but still want to enjoy similar features then you can invest in Bajaj Finance FD that provides a high interest rate, flexible tenor, and higher interest rate to senior citizens. It also offers extra FD interest rate for using the online FD form and allows you to apply for a loan against your FD to cover your immediate financial needs.
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.