Understanding Senior Investment Funds: What You Need To Know

Senior investment funds are a type of investment opportunity that focuses on senior housing and assisted living. These funds aim to address the growing demand for senior living facilities due to the increasing elderly population and the lack of new construction in this sector. Senior investment funds offer attractive returns, with projected rates of 7.50% to 21.00% and an average annual return of 11.4% over the past decade. They are considered recession-resistant and needs-based investments, as the demand for senior housing is expected to be independent of economic conditions. Additionally, senior living facilities are well-positioned for success in all phases of the real estate cycle. These funds provide investors with access to an asset class that has been historically challenging to enter, allowing them to capitalize on demographic trends and earn strong yields.

Senior Living Fund: a private equity company that focuses on senior housing equity and debt investments

Senior Living Fund is a private equity company that focuses on senior housing equity and debt investments. It aims to address the growing demand for senior living facilities in the US, which is expected to increase as the number of Americans aged 65 and above rises from 56 million in 2020 to 79.2 million by 2035. This demand is further exacerbated by the slow construction of new senior housing units, which was significantly impacted by the 2019-2020 pandemic.

Senior Living Fund provides accredited investors with an opportunity to achieve financial gains while positively impacting the lives of elders and caregivers. The company offers a diversified portfolio of healthcare real estate investments, with a range of options to suit varying investment objectives. These include:

• SLF Value-Add 1: The highest projected IRR option, with a projected IRR of 12.00% - 21.00%. It includes preferred payment accrual and profit participation, with a 4.5 to 5-year anticipated term and a $50,000 minimum investment.
• SLF Value-Add 2: A monthly payment option with a projected IRR of 10.50% - 20.00%. It includes monthly payments and profit participation, a 4.5 to 5-year anticipated term, and a $50,000 minimum investment.
• SLF Fixed Income Fund I: The least risk-averse option, with a projected IRR of 7.50% - 10.00%. It offers fixed monthly investor payments, a 3-year minimum investment term, and a $50,000 minimum investment.

Senior Living Fund conducts a rigorous due diligence process for each investment opportunity, evaluating market demand, facility design and construction, location intelligence, operations management, financial reserves, and more. The company also prioritises the well-being of residents by ensuring high-quality facility designs and experienced long-term operators.

Senior Citizen Savings Scheme (SCSS): a government-backed savings scheme for those above 60 with zero risks

The Senior Citizen Savings Scheme (SCSS) is a government-backed savings scheme for senior citizens in India. Introduced in 2004, the scheme provides a steady and secure source of income for those above 60 in their post-retirement phase.

The SCSS is a full debt instrument with zero risks. It is a retirement benefits programme, offering a regular income stream with the highest safety and tax-saving benefits. Senior citizens can invest a lump sum in the scheme, either individually or jointly, and benefit from tax advantages. The scheme is available through the Post Office or authorised banks.

The minimum deposit amount is Rs.1,000, and the maximum is Rs.30 lakh. The maturity period is 5 years, with the option to extend for a further 3 years. The interest rate is currently 8.2% per annum, paid quarterly. The interest rate is revised every quarter, taking into account market rates and inflation levels.

The SCSS is a safe and reliable investment option, with the government guarantee ensuring zero risk. The account opening process is simple, and the account is transferable across India. The scheme offers a high interest rate and tax benefits, making it a lucrative option for senior citizens.

Pradhan Mantri Vaya Vandana Yojana (PMVVY): a retirement-cum-pension scheme introduced in 2017, offering a fixed sum regularly

Senior investment funds are investment plans targeted at senior citizens, providing them with a fixed income post-retirement. One such example is the Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme, introduced by the Indian government in 2017.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a retirement and pension scheme for senior citizens in India. The scheme is managed by the Life Insurance Corporation of India (LIC), the country's largest life insurance provider. PMVVY offers a guaranteed regular payout for up to 10 years, with flexible payment frequencies (monthly, quarterly, half-yearly, or yearly). The interest rate for the 2023-24 financial year was set at 7.40% per annum and is subject to change annually.

Eligibility

To be eligible for the PMVVY scheme, applicants must be Indian citizens aged 60 or above. There is no maximum entry age.

Investment and Pension Details

The minimum investment amount, or purchase price, for PMVVY is Rs. 1,62,162, which will provide a monthly pension of Rs. 1,000 at the specified interest rate. The maximum investment amount is capped at Rs. 15 lakh. The pension payout depends on the investment amount, with higher investments resulting in higher monthly pensions.

Benefits

The PMVVY scheme offers several benefits to its subscribers:

• Rate of Return: Assured return of 7% to 9% for 10 years, with interest rates revised annually.
• Maturity Benefit: The entire amount, including the final pension and purchase price, is paid out after the completion of the 10-year policy term.
• Pension Payment: Pension payments are made at the chosen frequency (monthly, quarterly, half-yearly, or yearly) during the 10-year policy term.
• Death Benefit: In the event of the subscriber's death within the policy term, the beneficiary will receive the purchase price.
• Loan Benefit: A loan of up to 75% of the purchase price can be availed after three years for emergencies. The interest on the loan will be deducted from the pension amount.
• Surrender Value: Premature exit is allowed in exceptional circumstances, such as critical or terminal illness of the subscriber or their spouse. The surrender value in such cases is 98% of the purchase price.
• Free Look Period: Policyholders can return the policy within 15 days (30 days for online purchases) and receive a refund of the purchase price after deducting applicable charges.

Tax Implications

The PMVVY scheme has the following tax implications:

• The scheme is not a tax-saving option, and the interest income is taxed according to the applicable income tax slab.
• There is no income tax rebate for contributions, and policyholders cannot claim deductions under Section 80C of the Income Tax Act.
• However, PMVVY investments are exempt from Goods and Services Tax (GST).

The Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme provides a guaranteed income for senior citizens in India, offering financial security during their retirement years. With its flexible payment options, assured returns, and additional benefits, the scheme serves as a valuable tool for retirement planning.

Post Office Monthly Income Scheme (POMIS): a low-risk monthly income scheme, safeguarding initial retirement years

Senior investment funds are investment options for senior citizens that offer regular income with low risk. One such scheme is the Post Office Monthly Income Scheme (POMIS), a government-backed investment scheme recognised and validated by the Ministry of Finance.

POMIS is a low-risk, monthly income scheme that offers considerable capital protection, safeguarding those initial years of retirement. The scheme offers a fixed monthly interest rate, currently at 7.4% per annum. The interest is paid out monthly, providing a fixed and guaranteed income.

Who Can Invest in POMIS?

POMIS is not exclusive to senior citizens. All Indian citizens aged 10 years and above can invest. A minimum investment of Rs. 1500 is required to open an account, with a maximum investment of Rs. 4.5 lakh for a single account and Rs. 9 lakh for a joint account.

Tenure and Withdrawal

POMIS has a minimum lock-in period of 5 years, after which the funds can be withdrawn or reinvested in the scheme for another 5 years. If funds are required before the maturity period, a withdrawal can be made after the first year with a penalty of 2% for withdrawals between years 1 and 3, and 1% for withdrawals between years 3 and 5.

Tax Implications

There is no Tax Deducted at Source (TDS) on the returns from POMIS. However, the interest earned is taxable as income, and there are no tax benefits under Section 80C.

Benefits of POMIS

POMIS offers a steady and guaranteed income, providing peace of mind for retirees. The scheme is also transferable to different post offices across India, making it convenient for those who relocate. The low minimum investment amount also makes it accessible to a wider range of investors, especially in smaller cities and rural areas.

Senior Citizen Fixed Deposits: a scheme introduced in May 2020, providing regular income to those above 60

Senior Citizen Fixed Deposits is an investment scheme introduced in May 2020 to provide regular income to senior citizens in India aged 60 and above. The scheme was launched amidst the COVID-19 pandemic, which caused financial insecurity for investors, particularly senior citizens who rely heavily on interest income. The scheme was initially open for investment until June 30, 2021.

The Senior Citizen Fixed Deposit (FD) scheme is flexible in terms of eligibility. It is available to all Indian residents aged 60 and above, as well as Non-Resident Indian (NRI) senior citizens through their NRE or NRO accounts. Some banks may also allow customers over 55 who have taken early retirement to apply, with applicable terms and conditions varying from bank to bank.

Interest rates for the Senior Citizen FD vary among banks due to the short window and market fluctuations caused by the global crisis. Large banks are currently offering interest rates of up to 6.25% per annum, while Small Finance Banks are providing interest of up to 7.75% per annum on Senior Citizen Fixed Deposits. This is between 0.25% to 1.0% higher than the interest rates available for regular FDs.

To open an FD under this scheme, a minimum deposit of Rs.5,000 is required for online bookings, and Rs.10,000 for bookings made at a bank branch. The maximum investment amount is typically capped at Rs.2 crores, although this may vary by bank. Senior citizens can choose different interest payout terms depending on the chosen lock-in period, including monthly, quarterly, half-yearly, or yearly interest credited to their savings account.

The tenure of a Senior Citizen Fixed Deposit ranges from short-term deposits of 180 days to longer terms of 1, 3, and 5 years. The scheme falls under the ETT category, offering tax-free FD interest of up to Rs. 50,000 per year for Senior Citizens. Investing in this scheme should be considered alongside other active bank fixed deposits. Opting for the maximum 5-year lock-in tax-saving FD can provide additional tax benefits under Section 80C of the Income Tax Act, 1961.

It is important to note that interest rates under this scheme are subject to change and can be revised by the bank without prior notice. Additionally, the fixed deposit can be used as collateral to avail a loan. While the scheme offers a stable source of income, premature closure is allowed at any time, subject to a 1% penalty, except for the 5-year Tax Saver Fixed Deposit.

Frequently asked questions