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For those who are looking for other options to invest their funds for the long term, pension plans could be a good idea. Representative Image (Unsplash)

Retirement is a sensitive subject from the emotional point of view. From the financial point of view, it might be even more sensitive.

Senior citizens of the country are facing hard times due to declining interest rates, as they mostly depend on bank fixed deposits for regular income. For those who are looking for other options to invest their funds for the long term, pension plans could be a good idea.

It is expected that in the long-run, inflation will fall and so will interest rates.

Here are five pension schemes that one can consider for parking the lumpsum that one gets at the time of retirement from service and also those which you might consider for investing for retirement since your youth.

LIC Saral Pension Plan

It is a non-linked, non-participating, single premium, immediate pension plan. Those who are between 40 years to 80 years can opt for this plan. The pension will be paid lifelong and there is no maximum limit on the amount one can invest.

Two types of immediate annuity options available under this plan:

Option 1 (single Life): Life Annuity with return of 100% of purchase rate.

Option 2 (joint life): Joint life last survivor annuity with return of 100% of purchase on death of the last survivour.

If an individual invests Rs 10 lakh in LIC Saral Pension Plan he or she will earn Rs 51,650 yearly pension that works out to Rs 4,304 per month. In the case of joint life, the yearly pension works out to Rs 51,150.

PM Vaya Vandana Yojana

This one is for parking the funds you might get at the time of retirement.

Pradhan Mantri Vaya Vandana Yojana (PMVVY) is an immediate pension scheme, which pays out a pension at the assured rate of return. The scheme is designed specifically for senior citizens, who are above the age of 60 years.

It is currently offering an annual rate of 7.4%. The policy is for the period of 10 years and the maximum you can invest is Rs 15 lakh.

A loan can be taken from the policy after 3 years of completion, which will be a maximum of 75% of the invested amount.

Senior Citizen Saving Scheme

Like PMVVY, the Senior Citizens Savings Scheme (SCSS) is also for investing the fund one gets at retirement. It is one of the most popular investment instruments among senior citizens. It is a government-backed retirement benefits program.

Those who are above 60 years of age are eligible to invest. It offers the highest return at 7.4% per annum payable quarterly subject to maximum limit up to Rs 15 lakh.

The tenure of the scheme is five years. But the account can be extended for further 3 years.

Apart from senior citizens, retired employees above 55 years and below 60 years can also apply provided the investment is made within 1 month of receipt of retirement benefits. For defence employees, the age limit is above 50 years of age and below 60 years of age.

Atal Pension Yojana (APY)

Atal Pension Yojana (APY) came into effect from June 2015 in order to create a universal social security system for all, especially the poor, under-privileged and the workers in the unorganised sector.

This scheme is available for all Indian citizens between the ages of 18-40.

The subscribers can get pension starting from Rs 1,000 per month to Rs 2,000, Rs 3,000, Rs 4,000 and Rs 5,000 per month after the age of 60 years, depending upon their contribution during the subscription period.

Under the scheme, the government also co-contributes 50% or yearly Rs 1,000 of the subscriber’s contribution, whichever is lower.

National Pension System

The National Pension System (NPS) is one of the most important government sponsored schemes. It is a popular, tax-friendly scheme.

NPS provides a larger eligibility window for the Indian population to enrol themselves and ensures long-term financial security to its subscribers. The maximum age to enter the National Pension System has been increased from 65 years to 70 years by the PFRDA.

One can withdraw 25% of the corpus before the maturity date, but only three years after the subscription starts.

If the accumulated pension wealth in the subscriber’s permanent retirement account is equal to or less than a sum of Rs 5 lakh, the subscriber will have the option to withdraw the entire accumulated pension wealth without purchasing annuity.

However, after the exercise of this option, the right of the subscriber to receive any pension or other amount under the NPS or from the employer or government will be extinguished.

According to the 2011 census report, the number of senior citizens was at 10.3 crore or about 8.6% of the population. The figure is estimated to reach almost 32 crore in the next three decades.