Retirement investment schemes in India: NPS, SCSS and more

Every salaried individual wants to be financially secure after retirement. For a healthy corpus and regular income after retirement, an individual needs to define the retirement goals and should start a retirement savings plan early in his life. For an ideal retirement plan, people need to finalise how much income do they need to require to live their desired lifestyle post-retirement

years. Selecting the right retirement plan after doing good research and taking financial advice from any expert for post-retirement requirements is also a good idea. While planning, every individual should also consider medical costs and miscellaneous expenses.

Let’s take an example of how much money one would require to enjoy the same standard of living he/she had before retirement. Taking into account the increasing costs over the years, if a person earn Rs 20,000 a month, then the individual would require around Rs 15,000 to Rs 18,000 a month in retirement income.

People looking to invest for retirement can opt for the National Pension Scheme (NPS). It is a central government-controlled plan aimed at providing a regular income source to the subscribers. NPS can be availed by both resident Indians and NRIs. The entry age is between 18 years and 70 years. In September 2024, the government also launched the NPS Vatsalya scheme with an aim to secure the future of its young subscribers.

Unit Linked Insurance Plans (ULIP) schemes not only offer one of best investment options for retirement, but also provide life cover plans. In this scheme, a depositor makes his investment in funds of his/her choice, and the other goes towards life cover. There are tax benefits on premiums paid under Section 80C.

People who are willing to take the stock market-related risks, can choose to invest in Systematic Investment Plans (SIP) for retirement. SIPs are systematically directed plans which require investors to deposit a certain amount towards mutual fund investments at regular intervals. The Mutual Fund SIP investment option gives leverage of investing weekly, monthly or quarterly instead of making a lump sum investment.

Public Provident Fund (PPF), the government managed plan is a long-term savings and investment scheme. It assures guaranteed returns and the interest rate on PPF is compounded annually and is set by the government. Currently, the government is offering 7.1 per cent on PPF scheme. A depositor is required to make a minimum deposit of Rs 500/- and maximum deposit of Rs 1,50,000/- in a financial year. Deposits qualify for deduction from income under Sec. 80C of IT Act and the interest is completely tax-free.

Fixed Deposits are considered the best investment for retirement for people who don’t want to get into market risks and get a regular fixed source of income. In FD schemes, the interest rate is fixed at the time of opening the account and premature withdrawal is permitted on certain plans with some amount of penalty.

The Senior Citizen Saving Scheme (SCSS) is a government-sponsored scheme for senior citizens and early retirees which allows an individual of the age of 60 years or more to open the account. If an individual is 55 years of age or more but less than 60 years, but has retired on superannuation or under VRS, is also eligible to open an account subject to some conditions. A person can make a minimum deposit of Rs 1000/- and maximum not exceeding Rs 15 lakh. As per Post Office website: Interest rate stands at 9.3% per annum, payable from the date of deposit of 31st March/30th Sept/31st December in the first instance & thereafter, interest shall be payable on 31st March, 30th June, 30th Sept and 31st December.