Budget 2023: Is senior citizens’ savings scheme now large enough to meet financial goals of elderly?

In the Budget 2023 recently, Union Finance Minister Nirmala Sitharaman raised the maximum deposit limit for senior citizens from ₹15 lakh to ₹30 lakh.

This is seen as a wider cushion of retirement corpus for investors in their golden years. As one person is allowed to keep a total of ₹30 lakh, the couple can together have a total of ₹60 lakh (30 X 2) in a joint account.

Wealth advisors believe that this corpus, although not sufficient to meet all the financial goals of elderly people, is large enough nevertheless.

S. Sridharan, a SEBI-registered investment advisor and founder of Wealth Ladder Direct, says that it is a perfect risk-free financial instrument for elderly people to park their money in order to meet their financial goals.

“The returns are good and they are risk-free and now with a large size ( ₹30 lakh), the scheme offers a plenty of benefits,” says Sridharan.

Key features of the scheme

Senior citizens’ savings scheme account is a post office savings scheme that can be opened individually or jointly with spouse. An account holder must be above the age of 60 or above 55 so long as s/he has taken a voluntary retirement.

The minimum deposit amount is ₹1,000 while the maximum amount is ₹30 lakh.

Currently, the interest offered on the scheme is 8 percent per annum until Mar 31, 2023. The interest is payable on the 1st working day of April, July, October and January.

The account can be closed after expiry of five years from the date of opening of account. Even premature closure is permissible subject to certain conditions.

Equity in portfolio?

Investors must apprise themselves of the fact that a retirement corpus of ₹60 lakh (for the couple) may not be adequate to meet all the financial needs of an elderly couple during its retirement years. So, they can park a portion of their corpus in the equity as well.

“Let us suppose that someone has a corpus of ₹one crore. One can keep a maximum of ₹60 lakh in the scheme along with the spouse, the remaining ₹10 lakh can be kept in an account for emergency funds, and the remaining ₹30 lakh can be parked in a dynamic asset allocation fund or a large cap fund. This will ensure that the retiree can continue to earn inflation-adjusted returns in their retirement,” says Mr Sridharan.

“In order to ensure risk-adjusted and inflation-adjusted return, one can keep 30 percent of corpus in equity,” he adds.

Abhishek Dev, Co-founder and CEO of Epsilon Money Mart, also concurs.  

"The increase in SCSS limit is a welcome move towards retirement income and protection for our senior citizens. However, this in itself may not be sufficient depending on lifestyle and living expenses. Based on the risk profile, retirement corpus availability and income and legacy needs, investors may also wish look at some other relevant options such as annuity plans, bonds and deposits and conservative mutual funds (conservative hybrid funds, debt funds),” says Mr Dev.