Top Government Pension Schemes Offered to Senior Citizens in India

Retirement brings several changes in your life, out of which the most crucial change has to be the financial restrictions that are suddenly imposed on you post-retirement. Your income might be reduced substantially, which makes it difficult for many to deal with living expenses. 

Sudden medical emergencies during post-retirement can also pose a financial burden if you don’t have sufficient corpus. In order to aid the retired population, the government of India has come up with multiple pension schemes for senior citizens.

What Are Pension Schemes?

A pension scheme is a type of long-term savings plan wherein you save some money regularly to provide you with an income when you retire. This is an ideal investment plan which helps you save money for your post-retirement life and also comes with the added benefit of insurance cover. 

In India, Government employees first received pension benefits in 1881 through the Royal Commission of Civil Establishments. Today, the government of India offers several pension schemes for the government as well as private employees.

Also Read: Understanding NPS Tier 1, its features, returns, and more

List of top Pension Schemes for Senior Citizens in India

  1. Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Launched on May 4, 2017, this is a pension scheme backed by the government. This fund is operated and managed by the Life Insurance Corporation of India (LIC). Key features include:

  • Subscribers must be senior citizens, i.e. 60 years of age or above. There is no maximum age limit to avail of this scheme.
  • The subscriber must be an Indian citizen. 
  • The mode of the pension payment is monthly, quarterly, half-yearly and yearly. The pension payment will be made via NEFT or an Aadhaar-enabled payment system.
  • The minimum pension amount is:
    • Rs. 1,000/- per month
    • Rs. 3,000/- per quarter
    • Rs. 6,000/- per half-year
    • Rs.12,000/- per year
  • The maximum pension amount is:
    • Rs. 9,250/- per month
    • Rs. 27,750/- per quarter
    • Rs. 55,500/- per half-year
    • Rs. 1,11,000/- per year
  • The total purchase price for one person should not exceed Rs. 15 lakh. 
  • The returns received through this scheme are taxed at the applicable tax rates. The policyholder cannot claim a deduction under section 80C of the Income Tax Act. However, the returns are exempt from GST.
  • One can avail of a loan of up to 75% of the Purchase Price after 3 policy years, to meet liquidity needs). 
  • The scheme also allows for premature exit for the treatment of any critical/ terminal illness of self or spouse. In such situations, 98% of the Purchase Price shall be refunded.

Also Read: List of Top Pension Plans You Can Invest in India

  1. National Pension Scheme (NPS)

This is a voluntary and long-term investment plan for retirement under the supervision of the Central Government and Pension Fund Regulatory and Development Authority (PFRDA). NPS was launched in 2004, and it was initially available only for government employees. Currently, the plan is open to employees of public, private as well as unorganised sectors with the exception of the armed forces. 

This scheme is suitable for anyone who wants to start planning for their retirement early. Key features of NPS are as follows:

  • An Indian citizen between the ages of 18 to 70 years can open a NPS account.
  • Under NPS, individual savings are pooled into a pension fund which are invested by PFRDA-regulated fund managers into the diversified portfolios of Government Bonds, Bills, Corporate Debentures and Shares.
  • After retirement, you cannot withdraw the entire corpus. You have to keep aside at least 40% for receiving a regular pension.
  • As per Section 80CCD of the IT Act, a tax deduction of up to Rs. 1.5 lakh can be claimed on the individual’s contribution towards the National Pension System (NPS). You can claim an additional deduction of up to Rs. 50,000 for any other self-contribution under section 80CCD(1B).
  • Partial withdrawals are allowed after three years of opening the account, for specific purposes like home purchase, child’s education and medical expenses.
  1. Employee Pension Scheme (EPS)

The Employee’s Provident Fund Organisation (EPFO) manages this social security scheme. It was launched in 1995 and provides a pension for employees working in the organised sector. One can avail the pension upon reaching the age of 58. Moreover, the employee has to provide continuous or intermittent service for at least 10 years to be eligible for the scheme.  Key features of EPS are as follows:

  • Both employees and employers contribute 12% of their base salary and dearness allowance (DA) to the EPF. While the employee contributes entirely to EPF, the employer contributes 8.33% to EPS and the balance towards the EPF scheme.
  • Anyone who is a member of EPFO can avail of the benefits of this scheme. The beneficiary can withdraw their EPS at a reduced rate at the age of 50. 
  • If you defer the pension for 2 years, that is, till 60, you will get an additional 4% on your pension yearly.
  • If an applicant passes away during their service or after retirement, their family members are eligible to receive the pension benefit. 

Also Read: PFRDA – Pension Fund Regulatory and Development Authority

  1. Varishtha Pension Bima Yojana (VPBY)

This scheme is under the administration of the Life Insurance Corporation (LIC). The government of India announced the revival of the scheme in the Union Budget of 2014-15. 

  • This scheme is available for citizens above 60 years of age. However, there is no maximum age limit to avail of the scheme. 
  • This plan has a lock-in period of 15 years. 
  • The pensioner can buy a policy by paying a lumpsum amount. For receiving the pension, the beneficiary can choose the pension frequency per their needs and convenience. 
  • The pension payment is payable to your bank account via ECS or NEFT. This scheme offers a pension with 9% interest p.a. on the premium amount. 
  • After three years of subscribing to the policy, the policyholder can take a loan against the policy. The limit for the loan is 75% of the purchase price. 
  • You can cancel the policy within 15 days from the receipt date of the policy. The premium amount will be refunded after deducting stamp duty charges.
  • It also provides income tax benefits. Although the pension amount is taxable, the premium you pay is exempt from tax under section 80C of the Income Tax Act.
  1. Senior Citizen Savings Scheme (SCSS)

This savings scheme is a government-backed retirement benefit scheme. It came into effect on August 2, 2004. Although it started off as a post-office savings scheme, policyholders can now open accounts in public sector banks as well. 

  • It is a one-time investment that can be done individually or jointly with your spouse to get a regular income.
  • Any Indian citizen aged 60 or above is eligible to open an account under this scheme. 
  • An individual who is between 55-60 years of age and has retired under Superannuation, VRS or Special VRS, can also open an account.
  • The minimum deposit amount is Rs. 1000, while the maximum is Rs. 15 lakh. 
  • You can open more than one account for this scheme; however the combined amount for all accounts should be within Rs. 15 lakh. 
  • It takes 5 years for the deposit to mature, after which an extension of another three years is possible. 
  • Early withdrawal is possible, but a penalty fee is chargeable. 
  • The account is transferable across all post offices and banks in India. 
  • You will get interested on the deposit once every quarter, with the current interest rate being 7.6% per annum. 
  • Under section 80C of the Income Tax Act, 1961, you can get a tax deduction of up to Rs. 1.5 lakh.
  1. IGNOAPS – INDIRA GANDHI NATIONAL OLD AGE PENSION SCHEME

This pension scheme for senior citizens is offered by the Government of India to secure the financial future of the elderly. It was introduced in 2007 by the Ministry of Rural Development and is popularly known as NSAP (National Social Assistance Programme). This scheme’s primary objective is to provide social protection by offering pensions to beneficiaries. Key features of the scheme include:

  • It is a non-contribution government pension plan, which means that the beneficiary is not required to contribute any amount to get the pension.
  • The beneficiaries aged between 60-79 years are entitled to get a monthly pension of Rs. 200, and beneficiaries aged over 80 years get a pension of Rs. 500.
  • The pension amount is directly credited to the beneficiary’s bank account or post office account.
  • The applicant should come from a low-income or BPL group.

Also Read: Here’s How You Can Retire Rich in India

  1. Atal Pension Yojana (APY)

This social security scheme came into effect after the 2015-16 Union Budget was announced by the then finance minister Mr. Arun Jaitley. It aims to cater especially to the poor, underprivileged and unorganised sector workers. This scheme is backed by the Central Government and PFRDA and does not involve any risk of losing capital. 

This scheme ensures that no citizen has to worry about their illness or any accidents in their old age. The key features of this yojana are:

  • You have to be between the age of 18 to 40 to invest in this scheme.
  • Provided that from 1st October 2022 any citizen who is or has been an income-tax payer, shall not be eligible to join APY
  • The contributions towards this scheme must continue for 20 years.
  • Having a savings or post office account is a must to apply for APY.
  • The amount gets debited automatically from the bank account of the scheme holder. The amount is debited every month or quarterly, or half-yearly, at the convenience of the scheme holder.
  • Depending on your contributions you will receive a periodic pension of Rs. 1000, Rs. 2000, Rs. 3000, Rs. 4000, and Rs. 5000 when you attain the age of 60.
  • You can either increase or decrease the contribution at your convenience once a year.
  • The contributor’s spouse can claim the pension upon the contributor’s death, and upon the death of both the contributor and the spouse, the nominee will receive the accumulated corpus. 
  • In case of premature death of the subscriber (death before 60 years of age), the spouse of the subscriber can continue contributing to the APY account of the subscriber, for the remaining vesting period, till the original subscriber would have attained the age of 60 years.
  • In case of critical illness, you can exit and withdraw from the scheme before the age of 60.
  • The minimum pension would be contributed by the Central Government if the accumulated corpus earns a lower-than-estimated return on investment and is inadequate to provide the minimum guaranteed pension.
  • The subscribers should keep the required balance in their savings bank accounts/post office savings bank accounts on the stipulated due dates to avoid any overdue interest for delayed contributions.

Also Read: Section 80CCD: Deductions For NPS And APY Contributions

Final Word

The government of India offers many pension schemes for senior citizens to ease their post-retirement life from the burdens of financial instability. Before opting for it, you need to check the various features and advantages you can get from the particular scheme. Checking the terms and conditions are also of utmost importance before registering for the scheme. 

FAQs about Pension Schemes Offered to Senior Citizens 

Can I claim from both NPS and Atal Pension Yojana?

Yes, you can invest in both NPS and APY simultaneously. However, you must fulfil the eligibility criteria for both schemes to do so. If both schemes help meet your financial requirement, you can invest in both plans simultaneously.

What is the lock-in period in NPS?

The investments you make in NPS tier-1 are locked in until the age of 60. When you reach the age of 60, you can withdraw a maximum of 60% of your corpus and the remaining 40% must be used to purchase an annuity. In case of Tier-2 accounts, there is no rule on withdrawals.

Can I surrender my Varishtha Pension Bima Yojana?

Due to any critical illness, you can surrender this scheme within 15 years of subscribing to it. You will get 98% of the single premium in this case. If you surrender after 15 years, you will get 100% of the single premium amount.

Investments Principal at Wint Wealth

Krishna is an investment professional with a demonstrated history of working in Debt Capital Markets. He has completed his B.E. (Hons) in Computer Science Engineering from BITS Pilani and MBA (Finance) from JBIMS, Mumbai. He is currently working as Investments Principal at Wint Wealth. Previously he worked at Kotak Mahindra Bank at their DCM desk and Northern Arc Capital at their Structured Finance desk.

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