Latest news with #SCSS
Hans India
8 hours ago
- Business
- Hans India
How to make your retirement fund last a lifetime?
As life expectancy increases and pension coverage shrinks, building a retirement corpus isn't enough — making it last a lifetime is the real challenge. Rising medical costs, inflation, and market fluctuations can quickly deplete savings unless your retirement portfolio is built to endure all life stages. That's where a pyramidal retirement framework comes in — a structured plan with three distinct layers for safety, stability, and long-term growth. Layer 1: Safety and Liquidity (50–60% of corpus) The foundation ensures uninterrupted monthly expenses and emergency access with minimal risk. Ideal investments include: Liquid and ultra-short debt mutual funds Senior Citizen Savings Scheme (SCSS) RBI Bonds SWPs with short-duration funds Overnight or arbitrage funds as emergency buffers This layer provides peace of mind and quick access to funds without market-linked volatility. Layer 2: Stability and Moderate Growth (25–30%) This middle layer aims to preserve purchasing power by beating inflation with moderate risk. Best choices: Multi-Asset Allocation mutual funds High-quality corporate bond funds Conservative PMS (Portfolio Management Services) offering regular payouts This is your reliable mid-term income source and inflation hedge. Layer 3: Long-Term Growth (10–15%) The top layer fuels your corpus for the long run and helps leave a financial legacy. Recommended options: Flexi-cap, large-cap, and mid-cap equity mutual funds Balanced Advantage Funds High-quality equity PMS for HNIs Use this layer sparingly in the early years of retirement and let it grow to fight long-term inflation and provide legacy capital. Smarter Returns Need Smarter Strategy A successful retirement plan isn't just about picking products — it's about strategy: Diversify across equity, debt, and gold Control risk by avoiding high-return traps and focusing on inflation-beating growth Optimise taxes by utilising LTCG exemptions and harvesting losses to lower liabilities Tax tip: LTCG from equity mutual funds up to ₹1.25 lakh annually is tax-free — spread withdrawals to stay under this limit. NPS: A Must-Have Retirement Tool The National Pension System (NPS) remains a powerful and underutilized tool: Withdraw up to 60% tax-free at retirement Use 40% to buy an annuity for lifetime income New SLW feature allows tax-efficient staggered withdrawals, avoiding market timing risks Pro tip: Opt for Active Choice during working years to get higher equity exposure and better long-term growth than the Auto Choice option. Mistakes to Avoid Relying only on annuities with low returns Ignoring healthcare inflation — always have health insurance and a medical emergency fund Locking funds in illiquid products like real estate or ULIPs Skipping estate planning — create a will, assign nominees, and consider a family trust Financial Freedom, for Life A large corpus doesn't guarantee comfort — but smart structuring, strategic allocation, and tax planning do. The pyramid approach ensures a steady income, liquidity in crises, and long-term capital growth. Done right, your retirement fund won't just last a lifetime — it'll also support your legacy.
Economic Times
3 days ago
- Business
- Economic Times
Can interest rate on PPF fall below 6.5% after repo rate cut of 1% this year?
ET Online The government is set to review the interest rates for small savings schemes like the Public Provident Fund (PPF), National Savings Certificate (NSC), Senior Citizens Savings Scheme (SCSS), and more, on June 30, 2025. So far, the interest rates on the Post Office Savings Scheme have stayed the same since the beginning of the year. But that may change now as the Reserve Bank of India (RBI) has significantly reduced the repo rate by a total of 1% this year. Bond yields have also adjusted to the falling interest rate, and banks have followed the suit by lowering the interest rates on fixed deposits. PPF is currently offering an interest rate of 7.1% which is very close to the lowest interest rate seen in the last 5 decades. Last time, PPF interest rate was seen below 7% was before August 1974. PPF being one of the most popular small saving schemes for long term investment, where investors have been used to expecting an attractive interest rate, any significant drop in interest rate could take the returns to a historically low level and may leave many disappointed. Let us check out how likely it is. Also Read: Are PPF, NSC and other small savings scheme interest rate headed for historic lows? How the Government decides PPF interest The interest rate on PPF is based on a formula recommended by the Shyamala Gopinath Committee. Following the committee's suggestions, the PPF interest rate is pegged 25 basis points above the average of a 10-year G-Sec yield for the previous to data available on the average yield for the 10-year G-Sec was 6.319% between March 25, 2025, and June 25, 2025. When you add those 25 basis points, the PPF interest rate comes out to 6.569%. It is crucial to note that the formula recommended by the committee is not binding on the government. Can the government bring the PPF interest rate below 6.5%? ET Wealth online spoke to experts about whether the government can lower the PPF interest rate below 6.5% if the bond yield continues to fall. Here is what they have to say: Namrata Mittal, Chief Economist, SBI Mutual Fund, says: Shyamala Gopinath Committee (2010) on Small Savings was tasked to review the interest rate structures and administration of small savings in India, including the PPF. The committee had recommended that interest rates for small savings schemes like PPF, should be linked to market yields of government securities (G-secs) of similar maturity. Specifically for PPF, the rate should be linked to the average yield of 10-year government bonds, with a spread of 25 bps above it, thus allowing the PPF rate to be more adaptable to changing economic conditions. However, the resets haven't truly been in line with the committee's recommendations. They have remained constant at 7.1% since April 2020. The committee has suggested that the government should reset these interest rates annually, aligned with the previous year's G-sec average yields. The average 10-year G-sec in FY25 was approximately 6.8-6.9%. Therefore, the 25 bps of mark-up could maintain the PPF rate at 7.1%. Plus, the small savings collection is moderating. The government collected Rs 4.5 trillion under small savings and PPF (combined) in FY24. It's likely to decrease to Rs 4.3 trillion in FY25 (RE stands at 4.1 trillion) and is projected to further decline to Rs 3.4 trillion in FY26 (according to Budgets). The slowdown in small savings is the combined effect of high base (from investment limits upgrade in Union budget 2024) and better returns in alternate avenues of financial savings (like capital market). In this context, a negative shift in interest rate seems less probable. Suresh Darak, Founder, Bondbazaar, says: "While we have seen short-term interest rates drop with the latest round of Repo rate and CRR rate cuts, the 10-year G-Sec has continued to trade in a narrow range around 6.5% for the last five years. Since PPF is a long-term investment with a 15-year lock-in, its returns are unlikely to be pegged below 6.5%. Moreover, the returns on PPF investment at 7.1% is already lower compared to other government saving schemes such as Senior Citizens Savings Scheme (8.2%), Sukanya Samriddhi Yojana (8.2%) and Kisan Vikas Patra (7.5%). PPF provides stable long-term financing to the government, unlike G-Sec, which is more susceptible to market forces and geopolitical risks. Lowering the interest rate on PPF from this level may lead to an outflow of funds to other investment avenues. Thus, it is unlikely that there will be a significant cut in PPF rate, and it should not go below 6.5%." Vineet Agrawal, Cofounder, Jiraaf, a Bond Investment platform, says: The PPF interest rate has held steady at 7.1% for an extended period, despite notable shifts in the interest rate environment. As per the Shyamala Gopinath committee's recommendations, small savings rates-including PPF-should be market-linked and set within a band of 25 to 100 basis points above the yields of government securities with similar maturities. Currently, the 10-year G-sec yield has dropped below 6.5% and is stabilising around 6.3% in response to the 100 basis points repo rate cut seen this year. The growing divergence suggests that the current PPF rate exceeds the recommended spread. With falling G-sec yields, the Finance Ministry will likely move to realign the PPF rate in the coming quarter. While a reduction below 6.5% is technically feasible, any such move would need to weigh alignment with market rates against the political and social sensitivities of lowering returns on a key household savings instrument. Adhil Shetty, CEO, says: It is important to remember that the formula recommended by the Shyamala Gopinath Committee is indicative and not binding, and the government has frequently deviated from it. The government can reduce the PPF interest rate below 6.5% if G-sec yields fall. However, PPF and other small savings are heavily influenced by political, behavioural, and economic factors. PPF is a household savings favourite, and reducing it to below 6.5% can have a serious impact on middle-class and retirement savers. A sharp cut could push savers to exit formal channels or chase riskier products, thereby undermining financial inclusion goals. The government will be wary of any drastic cuts in small savings rates. However, given the high liquidity and falling repo rates, slow correction over time cannot be ruled out. Has the PPF, since its inception, had an interest rate below 6.5%? According to data available from the National Savings Institute, the interest rate on PPF has dipped below 6.5% on four occasions. Initially, when the PPF was launched, it was offering an interest rate of 4.8% from 1968-69 to 1969-70. Following that, from 1970-71 to 1972-73, the PPF scheme offered 5% interest. In 1973-74, the rate increased to 5.3% and then from April 1, 1974, to July 31, 1974, it rose to 5.8%. PPF interest rate since inception YEAR RATE OF INTEREST (%) 1968-69 TO 1969-70 4.8 1970-71 TO 1972-73 5 1973-74 5.3 01.04.1974 TO 31.07.1974 5.8 01.08.1974 TO 31.03.1975 7 1975-76 TO 1976-77 7 1977-78 TO 1979-80 7.5 1980-81 8 1981-82 TO 1982-83 8.5 1983-84 9 1984-85 9.5 1985-86 10 1986-87 TO 1998-99 12 01.04.1999 TO 14.01.2000 12 15.01.2000 TO 28.02.2001 11 01.03.2001 TO 28.02.2002 9.5 01.03.2002 TO 28.02.2003 9 01.03.2003 TO 30.11.2011 8 01.12.2011 TO 31.03.2012 8.6 01.04.2012 TO 31.03.2013 8.8 01.04.2013 TO 31.03.2016 8.7 01.04.2016 TO 30.09.2016 8.1 01.10.2016 TO 31.03.2017 8 01.04.2017 TO 30.06.2017 7.9 01.07.2017 TO 31.12.2017 7.8 01.01.2018 TO 30.09.2018 7.6 01.10.2018 TO 31.06.2019 8 01.07.2019 TO 31.03.2020 7.9 01.04.2020 TO 30.06.2025 7.1 Source: National Savings Institute
India Today
4 days ago
- Business
- India Today
Are your savings at risk? Government may slash PPF, NSC rates next week
The government may lower interest rates on small savings schemes like the Public Provident Fund (PPF), National Savings Certificate (NSC), and others during its upcoming quarterly review on June 30, 2025, reported The Economic Times (ET).If rates are revised, the changes will come into effect from July 1 for the July–September quarter of far this year, interest rates for schemes such as Sukanya Samriddhi Yojana (SSY), Senior Citizens Savings Scheme (SCSS), and Post Office term deposits have remained unchanged. However, this may not continue in the next A RATE CUT IS BEING CONSIDEREDOne of the key reasons behind this expected change is the Reserve Bank of India's decision to cut the repo rate by a total of 1% so far in 2025. The central bank reduced the repo rate in February and April by 25 basis points each, followed by a larger 50 basis points cut in have already responded by lowering interest rates on fixed deposits. Some have even discontinued special FDs that offered higher returns for limited yields, which influence the interest rates of small savings, have also fallen. According to the 10-year government bond yield dropped from 6.779% on January 1 to 6.247% by June 24 — a decline of 0.532%. Lower bond yields are usually a sign that small savings rates may be THESE RATES ARE CALCULATEDInterest rates for small savings are set based on the Shyamala Gopinath Committee's recommendations. The formula uses the average yield of government securities in the secondary market and adds a 25-basis-point instance, the average 10-year G-sec yield between March 24 and June 24, 2025, is 6.325%. Adding 25 basis points brings it to 6.575%. Currently, PPF offers 7.10%, which is much higher than the formula suggests. This difference is why a cut is being considered, though the government may still choose to hold rates to ET, Rajani Tandale, Senior Vice President – Mutual Fund at 1 Finance, said the RBI's 50-basis-point cut in June, along with earlier reductions, brings the total repo rate cut in 2025 to 1%. She said this aligns with the central bank's aim to support growth by lowering borrowing costs.'As a result, interest rates for small savings schemes are likely to be lowered,' she said, while noting the final call will depend on the government's review and current market Shinghal, Founder and CEO of Scripbox, also told ET, 'SSS rates, while administratively set, are typically aligned with prevailing interest rate trends and yields on government securities.'He added that several banks have already reduced fixed deposit rates, and this shows broader rate transmission is happening. According to him, it is likely that PPF, SSY, and NSC interest rates could be cut by 25 to 50 basis Sarkar, Co-Founder of Wealth Redefine, shared a slightly different explained that while a 1% cut in repo rate points towards lower returns on small savings, the decision isn't automatic.'These schemes are lifelines for pensioners, retirees and middle-class households. A big cut could hurt them, especially when inflation is low and FD rates are already falling,' he told added that while a small cut of 0.1% to 0.3% is possible, a sharp drop seems unlikely. The government, he noted, may even choose to keep rates steady to protect INVESTORS SHOULD DO NOWThose planning to invest in small savings schemes should consider doing so before June 30. If they invest before the new rates take effect on July 1, their returns, especially for time-bound schemes like NSC, SCSS, and time deposits, will remain locked at the current rates until and SSY, however, are not fixed-rate investments. Their interest rates change over time and are calculated monthly. So, even if you invest now, future interest payments could be affected by a rate said 'Investors may consider locking into current Small Savings Scheme rates before the revision.' He also suggested that in a falling interest rate environment, long-term debt funds and target maturity bonds might become attractive alternatives for those looking to preserve real returns.(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)- EndsMust Watch advertisement
Mint
20-06-2025
- Business
- Mint
Retirement planning: Is this advisable to invest in solution-oriented mutual funds?
If you want to save for your retirement, it is feasible as well as advisable to invest in mutual funds across categories. Equity mutual funds enable long long-term wealth creation, debt schemes provide security. Additionally, investors can also allocate some funds to long term tax-saving instruments such as PPF, Senior Citizens Savings Scheme (SCSS) and Kisan Vikas Patra (KVP) for earning higher interest and saving tax at the same time. All in all, one needs to curate a portfolio of sorts to accumulate sufficient funds for the same. But what if you outsource the entire retirement plan to a fund manager by investing in a solution-oriented fund? Those who are not aware, solution oriented mutual funds refer to those schemes which have a lock-in period of at least 5 years or till retirement age, whichever is earlier, per the Sebi's categorisation of mutual fund schemes. There are a total of 29 such schemes with total asset size (assets under management) of ₹ 31,007 crore., as on May 31, 2025. Some of the large retirement funds include UTI Retirement fund ( ₹ 4,703 crore), Nippon India Retirement Fund ( ₹ 3,156 crore), HDFC Retirement Savings Fund ( ₹ 6,503 crore) and SBI Retirement Benefit Fund aggressive plan (2900 crore), reveals the data from Association of Mutual Funds in India (AMFI) as on June 19, 2025. Investing in retirement schemes is indispensable for investors to maintain the same standard of living after retirement as they had before it. 'Gone are the days when our parents were getting regular monthly pensions from the government. Nowadays most of people are from private jobs or running their own business. In today's world, when private jobs are not secured, there is no question of a pension from the employer. And that's made Retirement Planning more crucial,' says Preeti Zende, a Sebi-registered investment advisor and founder of Apna Dhan Financial Services. Soumya Sarkar, Co-founder of Wealth Redefine, says, 'Retirement-focused solution-oriented mutual funds can be a good choice for building a retirement corpus. These funds are designed for long-term goals, with a 5-year lock-in ensuring disciplined investing and shielding you from short-term market volatility. They offer a mix of equity (for growth) and debt (for stability), customised to your risk appetite, helping you accumulate wealth over time.' Those who want to curate their own portfolio can invest in a combination of mutual funds, opines Zende. 'It is better that you use a combination of diversified equity Mutual funds like large cap, flexicap and mid and small cap, along with EPF, PPF and NPS. So this portfolio will also take care of inflation-headed return, provide downside risk to the portfolio, and some income is tax-free,' adds Ms Zende. Visit here for all personal finance updates.
Mint
20-06-2025
- Business
- Mint
6 government schemes that offer higher returns than FDs
Fixed deposits (FDs) are a great way to keep your money safe. With the rising cost of living, investing your money in low-yield schemes can reduce your purchasing power. Instead, you can turn to other government-backed schemes. These options are low-risk and can be aligned with specific goals like: Stable monthly income Securing a child's future Retirement savings And most importantly, some of them even offer interest rates higher than 5-year FD returns from all banks (excluding Small Finance Banks). Here are 6 such schemes that help you protect your capital and beat inflation: For those who want a stable only income without having to dip into their principal savings, POMIS is a reliable option. Current interest rate: 7.4% p.a. (revised quarterly) Interest payout: Monthly (starts a month after initial investment) Lock-in: 5 years Premature withdrawal: Allowed after 1 year with a penalty Minimum investment: ₹ 1,000 1,000 Investment cap: ₹ 9 lakh (single) or ₹ 15 lakh (joint) 9 lakh (single) or 15 lakh (joint) Taxation: Interest earned is taxable per the individual tax slab The interest earned is the monthly income. While your principal stays untouched until maturity. However, POMIS is only for adult Indian residents; NRIs are not eligible. Comparing this with the SBI Annuity Deposit Scheme (ADS): It pays both interest and principal monthly, which means your initial investment keeps shrinking, and as a result, so does your interest income. Additionally, SBI ADS currently offers around 6.5% p.a. POMIS beats that with higher stability and capital protection. For retired people (over 60 years of age) looking for a steady income, SCSS may be one of the best government-backed options, especially if your parents have received a lump sum amount, such as a retirement gratuity or final settlement. Current interest rate: 8.2% p.a. (revised quarterly) Interest payout: Quarterly Lock-in: 5 years (extendable for 3 more years) Premature withdrawal: Allowed with penalty Investment limit: ₹ 1,000 to ₹ 30 lakh 1,000 to 30 lakh Taxation: Interest earned is taxable per the individual tax slab It's simple, you invest once and get returns every quarter for 5-8 years. All the while, your principal stays untouched. However, even if you do not claim the quarterly interest, it does not earn any additional interest. Again, compare this with SBI ADS (for senior citizens), which returns part of your principal every month. As the principal shrinks, so does the interest income. Even at 7.5% p.a., the yield is lower over time. Meanwhile, SCSS keeps your money intact and your returns steady. As a parent to a girl child, you can use SSY to build a long-term financial cushion for her education and/or marriage. The scheme offers high interest and full tax exemption, making it one of the most rewarding options for goal-based savings. Current interest rate: 8.2% p.a. (compounded yearly; revised quarterly) Maturity: 21 years from the date of investment or when she gets married (after turning 18) Contribution period: 15 years Premature withdrawal: Allowed For the medical treatment of life-threatening diseases of the girl child In the event of the guardian's death Investment limit: ₹ 250 to ₹ 1.5 lakh p.a. (either lump sum or in multiple instalments) 250 to 1.5 lakh p.a. (either lump sum or in multiple instalments) Taxation: Completely tax-free You can open an account at any time before your daughter turns 10 years old, and you only need to contribute for the first 15 years. However, the account continues to earn interest until maturity. The returns are fully tax-free. In contrast, returns from minor FDs are taxed as per the guardian's slab. You can easily open it at your nearest Post Office, State Bank of India (SBI), or any public sector bank. Note: If you miss the minimum deposit in any financial year, the account will be treated as 'Account under Default'. It offers predictable growth without market risk. So, if you are an Indian individual over the age of 10 looking for a fixed-return investment option, NSC may be ideal for you. Current interest rate: 7.7% p.a. (compounded yearly; revised quarterly) Payout: At maturity Premature withdrawal: Not allowed except in case of the holder's death or under a court order. Minimum investment: ₹ 1,000 1,000 Where to invest: Post offices across India Taxation: Interest earned is taxable per the individual tax slab Unlike FDs, there's no TDS at maturity. Your full maturity value is received without deductions. Compared to 5-year bank FDs (currently lower yielding) and evenKisan Vikas Patra (KVP) at 7.5%, NSC delivers better returns. It can also be used as collateral for loans. For fixed income and capital safety, NSC is a clear step above traditional options. This is for the investors who want to grow their savings steadily, without worrying about market volatility. It offers guaranteed returns and your full principal back at maturity. Interest rate: 7.1% p.a. (compounded annually) Tenure: 15 years (extendable in 5-year blocks) Investment limit: ₹ 500 to ₹ 1.5 lakh per year 500 to 1.5 lakh per year Tax status: Fully tax-exempt (EEE) You can invest a small amount yearly (min. ₹ 500 or the account is discontinued), let it grow tax-free, and extend the account even after maturity. PPF does not require asset allocation or monitoring. It suits conservative investors who prefer simplicity and guaranteed returns over complexity and stock market risk. NPS is designed for long-term retirement planning. It helps you build a diversified portfolio across equity, corporate bonds, and government securities. Additionally, it helps you stay disciplined with regular contributions. Expected returns: 10–14% p.a. (market-linked) Lock-in: Until age 60 Minimum contribution: ₹ 1,000 per year 1,000 per year Who can invest: Indian citizens (residents and NRIs) aged 18–70 Investments are made across asset classes: Scheme E: Equity (maximum 75% exposure) Scheme C: Corporate bonds Scheme G: Government bonds Scheme A: Alternate assets At maturity, 60% of the corpus can be withdrawn as a lump sum (tax-free). The remaining 40% is used to buy an annuity that gives you post-retirement income (this is taxable as per the individual tax slab). Unlike PPF, NPS isn't tax-free when withdrawn. But it offers broader exposure and higher return potential if you can handle some market volatility. It works best for disciplined investors who want long-term growth, not just capital protection. Source: Finology When it comes to money, safety is paramount. However, it's not enough. You also need your money to grow. These 6 government-backed schemes offer both: capital protection and inflation-beating returns. Each serves a specific purpose: income generation, child-focused savings, or retirement planning. Choosing the right one depends on your goal and time frame. But when selected wisely, they offer a safer path to wealth preservation. However, for those aiming to grow beyond preservation, long-term wealth creation needs a different approach: Finology 30. It's a carefully curated list of high-quality businesses, selected after thoroughly researching their financial strength, governance, and long-term potential. Built for investors who want to stay ahead. Finology Research Desk advocates a practical approach: separate good and bad debt, restructure when needed, and stay still, if you are not sure where you stand? Try Finology Financial Health Check-up to assess your debt situation and start correcting course. Finology is a SEBI-registered investment advisor firm with registration number: INA000012218. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
