I would like to provide details or information about different investment options in India available for the parents who are approaching retirement or for retired parents; to get some income on regular basis or in addition with the their pensions.

Following information is on general basis, therefore, it’s advisable to make a proper plan with the help of a financial advisor. Also, please consider following points before making any decision:

1. Age of your parents
2. What are their current monthly expenses?
3. Amount of per month pension (expected or receiving)  (taking into consideration that expenses may doubled every 10 years due to inflation/health care cost)
4. Basics are in place?

Investment options

Your parents may get some money from their employer or through the investments they made or the corpus they have accumulated for the goal. It is recommended that retirees should invest their corpus or money accumulated in a basket of secure investments that will yield attractive and tax free annuities. Apart from putting part of their fund in bank fixed deposits, you can help your parents to invest their balance retirement corpus in the following investment options.

Post Office Monthly Income Scheme (POMIS):

In this scheme, you invest a certain amount and earn a fixed interest every month. POMIS is a 5 year investment option with a maximum cap of Rs 9 lakh under joint ownership and Rs 4.5 lakh under single ownership.

The interest rate is set each quarter. It is currently at 6.60% per annum payable monthly. However, the interest is taxable. Those retirees whose total income is below the taxable limit can consider this investment option.

Tax-free bonds:

Tax-free bonds are issued primarily by government-owned institutions like Indian Railway Finance Corporation (IRFC), Power Finance Corporation (PFC), National Highways Authority of India (NHAI), Housing and Urban Development Corporation (HUDCO), Rural Electrification Corporation (REC) and NTPC. Retirees may take note of the following aspects of tax-free bonds before investing.

• They are long-term investments and mature after 10 to 15 years.
• One can invest in them if they okay with long lock-in period and do not need money.
• The interest is tax-free therefore, there is no Tax Deducted at Source (TDS).

Pension plans of life insurance companies:

There are different pension plans offered by life insurance companies, including pension for lifetime for self, after death pension to spouse and/or return of corpus to heirs. Though one should be very careful while choosing the annuity or pension plans.

Senior Citizens’ Savings Scheme (SCSS):

This is a government guaranteed savings scheme with a tenure of 5 years. It can be further extended for another 3 years on maturity. Senior citizens aged 60 years or early retirees under VRS can invest in this saving scheme.

SCSS account can be opened in any of the authorized banks or post office branches. Present interest rate on SCSS is 7.4%. But the interest income is taxable. The upper investment limit is Rs 15 lakh. The interest rates on SCSS are revised each quarter.

Pradhan Mantri Vaya Vanadana Yojana (PMVVY)

This scheme is a pension scheme for senior citizens (60 & above) and it got introduced by Government of India on 4th May, 2017. The main objective of this scheme is to give senior citizens regular income source i.e. pension. This scheme available for purchase, both online and offline through Life Insurance Corporation of India (LIC), till Mar. 31, 2020.

Term of policy is for 10 years and pension mode is monthly, quarterly, semi-annually and annually. PMVVY offers 7%-7.40% returns pa.

The investment limit has been recently increased to 15 lakhs which were 7.5 lakh earlier. Also, this limit is applicable for per senior citizen. In other words, if husband and wife, both are senior citizen then they both can invest 15 lakhs each.

Mutual Funds/Dividend Stocks:

Though equity mutual funds or dividend stocks may give higher returns, there may be risks linked to stock market movements. Also, dividend from mutual funds and stocks are not fixed, regular and guaranteed. Also, debt mutual funds have now been exposed to considerable risks due to defaults by corporate bond repayments and liquidity crunch in the NBFC industry.

Reverse Mortgage:

Reverse mortgage is an another available option which can give regular income to your parents. But this option is not so popular in India. Further, it is only advisable in certain conditions as it could be expensive. In India, old people are generally emotionally attached to their home, hence this option could not work out for some of you. Talk to your parents before making any decision.

The above points are just for guidance and may assist you to help your parents get some income. Also, will help to build their trust and spend the rest of life worry free.

Remember, your parents are done with their responsibilities now it’s your turn!

Note: Given rates on above different options are subject to change as per government notifications. Please confirm before making any investment.