Given the concerns around economic slowdown and prevailing low inflation, interest rates are still to go on a downward path and amid it experts suggest to rake in the opportunity available currently as in foreseeable future, a rate cut of further 50 basis points is expected. It is to be noted that this year itself, the RBI has for three continuous rounds has reduced repo rate by 2 basis points each to 5.75% currently.
While retirees are given a benefit as additional return on their invested money, we suggest investment options which provide still better returns or interest rates on them decline at a slower pace:
1. Immediate annuity plans: These provide a source of regular income all through the life if annuity for life option is chosen. Also, though the rates on them tend to be lower than other comparable investment options, the insurance companies which offer them do not match the rates on them with the yield on government bonds on a fast basis.
These are most suitable for low income tax payers or non income tax payers as the returns on them are taxable.
2. Government saving schemes such as SCSS and PMVVY: Senior citizen saving scheme fetching 8.6% p.a. is another good option for low income slab individuals. PMVVY or Pradhan mantri Vaya Vandana Yojana offers 8%. PPF is another good option offering 7.9% and here after the maturity of the account i.e. after 15 years, you can use the tax-free annual withdrawal facility. This is tax-free interest and as the yield on government bonds is traversing lower, rates on such instruments is set to inch down in coming time.
3. Tax free bonds: Currently there are no tax free bonds available and investors need to take positions in them through the secondary market. Notably, the return or yields on them do not go down as sharply as in case of 10-year yield.
4. SWP: For regular stream of funds, investors can also consider systematic withdrawal plans that are tax-efficient and manage to garner better return for investors to beat inflation.
5. Deferred payment annuity: For still others, who will continue to be in the high tax slab, deferred annuity option will be good.