Mutual Funds Line Up Retirement Plans

Encouraged by tax incentives for investment in retirement schemes floated by mutual funds, several fund houses, including IDBI MF and Birla Sun Life MF, have lined up plans to launch such products.

Apart from IDBI MF and Birla Sun Life MF, DSP Blackrock MF, Axis MF and SBI MF have approached capital markets regulator Sebi to launch retirement-linked mutual funds and several other fund houses are expected to join the fray.

Mutual Funds Line Up Retirement Plans

Besides, Reliance Capital Asset Management Company, in December last year, had got the government's approval for first-ever equity-oriented pension scheme, giving tax benefits to investors.

Fund houses are queueing such schemes as retirement funds floated by fund houses have been given tax benefits in line with pension funds to attract long-term domestic savings into the equity market in the Budget presented last year.

Earlier, only insurance companies were allowed to offer pension products with tax incentives.

Investments in these schemes up to a limit of Rs 1.5 lakh are eligible for a deduction under Section 80 C of Income Tax Act.

These mutual fund schemes are expected to pool savings for retirement where investors have the option to lock-in the money till the retirement or redeem it before that.

These schemes offer to invest in several securities, including equity, equity-related instruments, debt and money market instruments, among others.

At present, only two fund houses have retirement-linked pension plans - Franklin Templeton Pension Fund and UTI Retirement Benefit Pension Fund.

IDBI MF filed its draft documents with Sebi last week to become the latest fund house to approach the capital markets regulator to launch retirement product.

IDBI Retirement Savings Fund is an open-ended scheme offering two plans for investment --Capital Builder Plan and Income Generator Plan.

"The investment objective of the scheme is to invest in a mix of securities comprising equity, equity-related instruments, debt and money market instruments through two portfolios to create a corpus for an additional source of income to meet variable needs of investors in their retirement," the fund house said in its draft papers.

Globally, retirement is one of the largest categories of investments whereas in India, it is still at a nascent stage.


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