Kerala Chief Minister Pinarayi Vijayan speaking to the Malayali community at Al Nasr Leisureland in Dubai. Image Credit: Ahmed Ramzan/Gulf News

Abu Dhabi: The government of South Indian State of Kerala will soon implement a lifelong monthly dividend-cum-pension scheme based on a one-time deposit for millions of Non-Resident Keralites (NRKs) living across the globe, a senior official told Gulf News on Monday.

“The government issued an order last week, accepting the proposal in principle,” said P.T. Kunhi Mohammad, chairman of the Kerala Non-resident Keralites Welfare Board, a government agency implementing welfare and pension schemes for an estimated 3.5 million non-resident Keralites across the globe, including over a million in the UAE.

The government has to formulate practical procedures of the scheme. “I hope that everything will be ready within a month and the Kerala Chief Minister Pinarayi Vijayan will unveil the scheme soon in Dubai for NRKs in the Gulf and in Mumbai for NRKs living in other India states,” Mohammad said on phone from Kerala.

As Gulf News exclusively reported on August 7, 2017, the ‘Dividend and Pension Scheme’ targeting middle-class NRKs aims to offer them an investment vehicle to secure their future, even if they lose their livelihood.

The scheme envisages collecting a one-time deposit of between Rs500,000 (Dh25,013) and Rs5 million (Dh250,232) from NRKs, which could also be paid in six instalments in three years. After an initial three-year lock-in period, the deposit will start yielding a fixed monthly dividend between Rs5416 (Dh271)) and Rs54,166 (2,711), depending on the deposit, until the investor’s death.

The scheme will be able to ensure such a high return (12 per cent) as the deposit will be locked in during the lifetime of the depositor and his or her spouse, the most probable nominee.

This means the government gets the deposit for a long time – probably 20 to 40 years to utilise it for development projects through official arms such as KIIFB [Kerala Infrastructure Investment Fund Board that facilitates development of both physical and social infrastructure in the state].

“Even if just 10 per cent of NRKs join the scheme, it can attract at least Rs500 million,” the chairman said.

The investor and his or her spouse gets an assured lifelong monthly income to secure their future, thanks to the lock-in system.

“This lifelong lock-in period should not be taken as a restriction in the case of expatriates. I proposed it from my own experience…because I have seen many tragic lives of expats,” Mohammad said.

He explained that many NRKs who saved money in various schemes and fixed bank deposits have ended up as destitute because of unplanned and uncontrolled spending habits. Some others lose their hard-earned money by investing in unviable or untrustworthy businesses or schemes.

“I have seen many well-to do expats end up working as security guards or watchmen in their old age.”

The lifelong lock-in period will ensure that their investment will never be spent for any other purpose but future sustenance of the depositor and spouse.

After the depositor’s demise, the monthly dividend would continue to go to his or her spouse, the probable nominee. After the nominee’s death, the deposit will be handed over to the legal heir, he said.

How much can NRKs earn from the scheme?

10% return will in effect offer 12% thanks to 3-year freezing

With Rs500,000-(Dh25,013) deposit , one can start getting a monthly dividend or pension after three years. The principal amount after three years will be increased to Rs650,000 (six hundred and fifty thousand) with 10 per cent annual returns. The annual return after three years will be Rs65,000 (sixty-five thousand) per annum or Rs5416 (Dh271) per month. In effect, it is 12 per cent return on the initial deposit [Rs500,000].

Those who deposit a higher amount [up to Rs5million] will get a corresponding monthly returns up to Rs54,166 (Dh 2,711).