Top 5 Government-backed Pension Plans for Senior Citizens

Retirement planning ensures that you have an additional source of income to meet your day-to-day expenses, medical expenses or any other financial emergencies. Keeping this into account, the government of India has launched several special pension schemes for senior citizens that aim to provide financial stability and security to retirees. This article elucidates the top 5 Government-backed Pension Plans for senior citizens and whether they make a good investment option to achieve your post-retirement goals.

Here are the top 5 government-backed pension plans for senior citizens:

1. Atal Pension Yojana (APY):

Atal Pension Yojana (APY) is a social security scheme offered by the Government of India for the workers of the unorganised sectors. It is one of the country's best investment plans for economically weaker sections as it helps them voluntarily save for retirement. Depending on the subscriber's age at the time of subscribing to APY and their contribution, they will receive a monthly pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000, or Rs 5,000. The minimum entry age is 18 years, whereas the maximum entry age is 40 years. Since it offers a pension from the age of 60 years, the minimum period of contribution is 20 years.

2. National Pension System (NPS):

National Pension Scheme (NPS) is a retirement benefits scheme offered by the Government of India to facilitate post-retirement regular income to subscribers. Under the NPS, a unique Permanent Retirement Account Number is allotted to each subscriber. It offers flexibility to the investor to choose to allocate the funds in equities and government securities. There is no maximum limit on the amount that can be invested in NPS. However, only investments up to Rs 50,000 are eligible for tax deduction under Section 80CCD (1B) of the Income Tax Act. Additionally, investments up to Rs 1,50,000 are eligible for tax deduction under Section 80C of the Income Tax Act.

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3. Pradhan Mantri Vaya Vandana Yojana (PMVVY):

Pradhan Mantri Vaya Vandana Yojana was introduced with the objective of providing monthly pensions to senior citizens while protecting their investments from falling interest rates. Individuals above the age of 60 can subscribe to the scheme, and it has a term of 10 years. After three years of investment, subscribers are allowed to avail of a loan against PMVVY. You should know that the pension ceiling in the scheme is decided based on the subscriber's family and their aggregate income.

4. Indira Gandhi National Old Age Pension Scheme (IGNOAPS):

The IGNOAPS was introduced in 2007 by the Ministry of Rural Development. The plan is also known as National Social Assistance Programme (NSAP). It primarily aims to provide social protection by offering pensions to the beneficiaries, such as senior citizens, widows, and the disabled. The IGNOAPS provides senior citizens with a monthly pension to help meet their ends in old age. Unlike other plans, this is a non-contribution government pension plan. So, the beneficiary does not have to contribute any amount to get the pension. The beneficiaries aged from 60 to 79 years can get a monthly pension of Rs 200, and the beneficiaries above 80 years are entitled to get a monthly pension of Rs 500. To benefit from the pension, the beneficiary must have a bank or post office account.

5. Employee Pension Scheme (EPS):

The Employee Provident Fund Organisation (EPFO) launched the EPS in 1995. The scheme's primary objective is to provide financial stability to employees of the organised sectors after retirement. It assures that all the employees receive a pension after crossing the age of 58 years. Hence, out of the employees' basic salary 12% dearness allowance is contributed yearly towards the Employee Pension Scheme. The employees who have served a minimum of 10 years, whether continuous or in breaks and are members of EPFO can avail of the scheme. Pension typically starts after the employee becomes 58 years old. However, in case of early retirement, employees should be at least 50 years old. If the employee defers pension until he/she is 60 years of age, an additional rate of 4% per year shall be given. The minimum monthly pension one can receive under the scheme is Rs 1,000. There are several types of EPS, such as Widow Pension, Child Pension, Orphan Pension, and Reduced Pension.

Do these government-backed pension plans for senior citizens make a wise investment option to fulfil your post-retirement goals?

While these plans are government-backed, most of them are targeted to provide financial security and stability in terms of day-to-day requirements. However, apart from your regular expenses, you might need funds for many other reasons, such as a medical emergency, home renovation or repairs, purchase of a car, a child's higher education, gifts to grandchildren, etc. While the pension amount in the government-backed plans is guaranteed, it might not be adequate considering the inflation and post-retirement financial needs.

If you are wondering why the returns on these retirement plans are so low, it is because most of these plans contribute insufficient corpus. It is invested in zero-risk financial instruments, such as bonds and government securities. Hence, if you want to be financially independent in your golden years and live a financially stress-free life, it is advisable to start investing for your retirement as early as possible. Sound retirement planning with a mix of carefully selected debt and equity mutual funds and gold ETF can help you accomplish your target at the right time.

Warm Regards,
Ketki Jadhav
Content Writer