Savings Certificate
Last year, the government started the Pensioners Savings Certificate with an interest rate of 11%, which was higher than the interest rate of other instruments at that time, and duration of 5 years. The intention was noble i.e. to financially help out the senior citizens in the last years of their lives. I along with some of my fellow pensioners bought some with our life's remaining savings. But alas! In a few months' time the government increased the interest rate but we continued to receive interest at old rate and the rate was even lower than the rate on other kinds of savings certificates. Government savings certificates give pathetically low return if encashed prematurely and we, the poor pensioners, found ourselves in a financial trap and lot of anguish. We could hold on to the savings certificates and accept lower return for a long time or encash it prematurely at a loss and buy new ones. But five years is a long time and may be there will be another rate increase and we will face the same situation all over again. Finally, as soon as the certificate was one year old I encashed it at 7.5% interest. All in all, it was a big loss I could ill afford and undoubtedly a bitter experience. I vowed never to step into these traps again. This is an example of pigheaded schemes authored by the government that creates adverse and unintended consequences.
Finally, may I suggest that if the intention is to help out the pensioners, the Pensioners Savings certificate should:
a. Not have a fixed rate of interest and if there is a rate change, the higher of the initial or the current rate should be given.
For all latest news, follow The Daily Star's Google News channel. b. Have 3 three years maturity period.
c. Should have small penalty for premature encashment because health condition may create sudden demand for cash. In case of death it should be immediately encashable at maturity rate of interest.
d. Should be accepted by banks as security for loans.