By Namrata Singh, CFP & Chaitali Shah, MA (Economics)

Government of India had introduced the Senior Citizens Savings Scheme (SCSS) in 2004 through Post Offices. 17 years after its launch the scheme can now be availed through select branches of nationalised banks and Post offices. ICICI Bank is one of the private players that offers this product.

Authorised banks or Post Offices do not provide a platform to open the account online. To open an account one has to visit the nearest bank branch or Post Office.

A Senior Citizens’ Saving Scheme (SCSS) is a government-backed retirement benefits programme. Senior citizens resident in India can invest a lump sum up to Rs.15,00,000 in the scheme, individually or jointly and get access to regular income.

Eligibility Criteria for investment:

• Senior Citizens of India aged 60 years or above
• Residents who have opted for Voluntary Retirement Scheme or Superannuation and are between 55-60 years of age
• Retired Defence personnel above 50 years of age

Please note that NRIs and HUFs are not eligible to open SCSS accounts.

If the account is closed before 1 year, no interest will be payable and if any interest has been paid shall be recovered from the principal amount.  There is a penalty of 1.5 per cent of the total amount deposited in case withdrawal is made between one and two years. The penalty is one percent if withdrawal is made after two years. Most Bank Fixed Deposits have a penalty clause of 1% for premature withdrawal.

Interest rates in India have been declining even before the onset of the Covid 19 Pandemic. The annual interest on savings accounts ranges between 2.5% to 3.5% while bank fixed deposits interest rates range between 5% to 6.25%.

SCSS pays a 7.4 percent annual interest to investors. It has one of the highest interest rates offered by a fixed income small savings scheme.

SCSS interest rate is reviewed by the Government quarterly and is subject to periodic change.  We do not expect the government to reduce interest rates drastically for small savings schemes in the near future. SCSS should definitely be a part of your fixed income asset allocation for all citizens above 60 years of age.  Our view is, all senior citizens should understand the SCSS product to take the benefit before taking the asset allocation decisions.

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Namrata Singh is Certified Financial Planner with more than 13 years of experience in banking and wealth management. [21:47, 17/12/2021] Chaitali Shah: (namrata@asinvestment.in)

Chaitali Shah, MCom & MA (Economics) was a Financial Economics – Faculty at Wilson College, Mumbai (Chaitali_s@hotmail.com)

(All views in the article are personal)