From investing in insurance to mutual funds to post office saving schemes, there are a plethora of options before the investors to secure fixed monthly income apart from the pension schemes.
Earning a steady monthly income from investments is one of the top priorities of the personnel nearing retirement. It should be one’s retirement goal, anyway. But, even for those who choose to work part-time or occasionally, supplementing the income with sources of regular income can prove to be beneficial especially when they grow old. Thankfully, there is no dearth of such plans in India. Apart from some pension schemes available in the market, there are monthly income schemes like Systematic Withdrawal Plans of mutual funds, Post Office Monthly Income Schemes and Senior Citizens Savings Schemes which one can opt for a regular income stream post-retirement.
Here are some of them:
1) National Pension Scheme – It is a voluntary defined contribution retirement savings scheme which has been introduced for providing adequate retirement income to every citizen of India. The pension fund which is a pool of individual’s savings is invested by Pension Fund Regulatory and Development Authority(PFRDA) in diversified portfolios comprising of government bonds, bills, corporate debentures and shares.
Investment is allowed for persons between the age of 18 years and 65 years. There are two types of accounts. In the Tier-1 account, before attaining 60 years of age, only 20 per cent of the contributions can be withdrawn and the 80 per cent is relinquished in the annuity from a life insurer. After attaining the age of 60 years, close to 60% contribution can be withdrawn and the rest 40 per cent is relinquished in the annuity. In the Tier-II account, a person can withdraw without any limit.
The tax benefit is Rs 1.5 lakh under section 80CCD(1) and Rs 50,000 as per section 80CCD(1b). The deduction has to be a minimum of 10% of gross income or 10% of salary or Rs 1.5 lakh.
2) Atal Pension Yojana – For the people in the unorganised sector, the government announced a scheme called Atal Pension Yojana in 2015-16. It is administered by PFRDA and gives a guaranteed minimum monthly pension to the subscriber, ranging between Rs 1000 and Rs 5000 per month. The GoI co-contributes 50% of the subscriber’s contribution or Rs 1000 per annum, whichever is lower for those not covered by social security schemes and who are not income taxpayers. It is applicable to citizens aged between 18 and 40 years. The exit is allowed at the age of 60 years and exit before 60 years of age is allowed only in the event of the death of the beneficiary or in case of a terminal disease.
3) Swavalamban Pension Yojana – A new pension system administered by PFRDA, it is applicable to citizens who are a part of the unorganised sector. In order to avail the benefits pertaining to the scheme, the individual shall not be employed by the central or state government or any public sector undertaking of the central or state government. Moreover, the employee must not be covered by any of the social security schemes.
The minimum contribution allowed is Rs 1000 per annum and the maximum contribution can be Rs 12,000 per annum.
4) Post Office Monthly Income Schemes – The scheme offers an interest rate of 7.3 per cent per annum, payable monthly. The interest is paid on a monthly basis from the date of deposit. The maximum investment limit is Rs 4.5 lakh in a single account and Rs 9 lakhs in a joint account. The maturity period is five years and the account can be transferred from one post office to another.
5) Pradhan Mantri Vaya Vandana Yojana – It is specifically for senior citizens and offers a guaranteed interest rate of 8 per cent. The investment limit has been increased to Rs 15 lakh from Rs 7.5 lakh by the finance minister and the last date to apply for PMVVY has been extended to 31st March 2020. The minimum age is required to be 60 years and the pension is payable at the end of each year. The frequency of payment is monthly/ quarterly/ half yearly/ yearly, chosen by the pensioner at the time of purchase.
6) Systematic Withdrawal Plans of Mutual Funds – Mutual funds allow investors an avenue of regular income through systematic withdrawal plans. In SWP, a fixed amount is withdrawn at fixed intervals. The option to invest in debt or equity funds lies with the investor. SWP is a reverse concept of SIP. It is a strategically designed plan to withdraw a fixed number of mutual funds unit and sell it in the market in order to generate monthly income.
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7) Monthly Income term insurance- Insurance providers have come up with new term plan policies which in addition to the sum assured gives monthly income to the family member. This plan provides a fixed tenure monthly income for 10 years to 20 years in addition to one-time assured sum. Some plans even provide monthly payout benefit in case when the insured is diagnosed with a critical illness. Insurer like ICICI Prudential, HDFC life, Max life insurance, Aegon life insurance to LIC life insurance offers this product.