MFs offering retirement schemes for individuals

Reliance MF has till now launched three equity oriented retirement schemes. SBI MF, Axis MF etc have also filed their offer documents with Sebi.

“People in India are under prepared for their retirement life,” says Surajit Mishra, EVP and national head, MF, Bajaj Capital.

Mutual funds have finally started offering retirement schemes for individuals.

While Reliance mutual fund has launched its equity oriented pension scheme, the third such scheme till date, others like SBI Mutual Fund, Axis MF and DSP BlackRock MF have filed their offer documents with the Securities and Exchange Board of India (Sebi) for launching their pension schemes.

Till date, only UTI MF and Franklin Templeton had come out with retirement plans for investors. These two funds launched in 1994 and 1997 respectively have a corpus of just around `2,000 crores.

Investors have the choice to either make a lump sum investment or make investment through systematic investment plan (SIP) on a monthly basis.

Post retirement, they can withdraw either the entire corpus or opt for regular pension in the form of dividends or sale of units. Since it’s a new concept in India, experts said that these new product offering from domestic fund houses would take little time to gain traction among investors.

“In India, the retirement planning is very less and people are underprepared for their retirement life. So equity oriented schemes are one of the best options for longterm retirement plans. The Reliance Retirement Scheme is purely an equity-oriented fund. The funds, which were launched earlier were predominantly debt oriented schemes,” noted Surajit Misra, executive VP and national head, mutual funds, Bajaj Capital.

According to

him, investors can get the benefit under Section 80C of the Income Tax Act. The section provides capital deduction of upto `1.50 lakh from an individuals total income while computing the total tax liability.

Ajit Menon, executive VP and head of sales, DSP BlackRock Investment management said that his fund house is providing three options to investors. “The aggressive plan would invest 70 to 100 per cent of the corpus in equities, the moderate plan would invest 50 to 65 per cent in equities while the conservative plan would invest upto 30 per cent of the corpus in equities and remaining in debt,” he added.