Are Senior Citizens FDs Better Than Senior Citizens Savings Schemes [SCSS]

For senior citizens, the safety of their investments is of utmost importance. Most senior citizen investors prefer risk-free investment instruments and allocate a certain portion of their investments for earning fixed income.

Fixed deposits are one of the best fixed-income instruments that offer the security of principal amount as well as high returns. Fixed deposits are issued by the banks and non-banking financial companies that offer a fixed return for a stipulated period of time against a lump sum deposit. This interest rate is higher with higher tenors.

For senior citizens, PPF and EPF options run out after the stipulated time periods. PPF amount gets matured after a period of 15 years, and EPF accumulation happens till the service lasts. Due to lack of high and stable investible options for senior citizens, a special scheme known as Senior Citizens’ Savings Scheme (SCSS) was started by the Government of India for retirees to deposit a lump sum amount from their Employee/ Public Provident Fund.

Senior Citizens’ Savings Scheme

This is a high-paying and stable scheme for people above the age of 60 years where investors can invest all the money received upon retirement within a month of receiving these benefits. It offers an interest rate of 8.7% per annum and is subject to change as per decisions by the government.  So should senior citizens look beyond this option?

Reasons for choosing fixed deposits over SCSS

Here are some characteristics that make fixed deposits a unique offering for senior investors.

1.    Flexibility with tenors

Fixed Deposits offer flexible tenors thereby providing flexibility to choose the investment horizon for your investments as per your financial goals. In contrast, PPF (Public Provident Fund), NSC (National Savings Certificates) or EPF (Employee Provident Fund) doesn’t offer flexible tenor without certain criteria.

SCSS offers a tenor of 5 years with an extension of 3 years for which the investor needs to submit Form B.

2.    Premature withdrawal:

Fixed deposits, except
5-year tax saving FDs, offer this facility. You can withdraw Bajaj Finance FD before maturity without any lock-in period condition. This can be useful for immediate cash requirements.

SCSS allows premature withdrawal only after a lock-in period of 1 year. In case of closure between 1 to 2 years of account opening, 1.5% of deposit is deducted as premature withdrawal charges. After two years, an amount of 1% of deposit is deducted as premature withdrawal charges.

There is only one extension allowed, and the account can be closed after one year of extension without penalty. Also, on the death of the account holder, no charges are levied on premature withdrawal and closure.

3.    Loans: 

FDs offer a distinguished facility to its holder to avail loan against fixed deposit without any time barrier. Bajaj Finance offers 75 % loan against cumulative fixed deposits and 60% loans on non-cumulative fixed deposits. These rates are flexible as per the terms and conditions applied.

SCSS does not offer any loans against the maturity amount.

4.    Monthly interest payouts:

You can avail interest payouts on a regular basis in case of non-cumulative FDs. You have the flexibility to select suitable payment options (monthly, quarterly, semi-annual, annually). This can immensely helpful for meeting monthly expenses for retirees. In SCSS, only quarterly payment is made – April, July, October, and January.

5.    Cumulative options:

Fixed deposits offer the cumulative option – i.e., interest is added back to the principal to allow computing. However, cumulative interest option is not available, and interest is not taken into account in SCSS.

6.    The rate of interest:

Fixed deposit rates change in accordance with the tenor chosen. At the highest level in company fixed deposits, senior citizens can gain a 9.1% interest rate with Bajaj Finance Fixed Deposit.

SCSS interest rates are decided once a year by the government, and they are not subject to major upswings. The current rate offered is 8.7%.

Senior Citizens’ Savings Scheme has a number of restrictions for withdrawal in SCSS and offers a fixed interest rate. Therefore, FDs with flexible investment terms and high interest rates are a better option for senior citizens as compared to SCSS.

Fixed Deposits offered by Bajaj Finance have been awarded CRISIL’s FAAA/Stable rating and ICRA’s MAAA/Stable rating that makes it extremely safe. Senior citizens can manage online FD account with Experia-your online fixed deposit account. Thus, these investments fulfill all the criteria for being a preferred investment option by senior citizens.

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