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Retirement Fund

Retirement planning no longer means investment in pension funds only; in fact, there are retirement mutual fund schemes that are specifically designed considering the long-term goal of retirement to ensure a stable flow of income post-retirement. 

How do Retirement mutual funds work? 

• These funds invest in a mix of securities comprising of equity, equity related instruments and fixed income securities • There is a lock-in period of 3-5 years • Most of the schemes levy an exit load on redemptions before a particular age • Most of such schemes offer the option of SWP Option (Systematic Withdrawal Plan) once the investor attains retirement age (on or after 60 years of age), which means that an investor can opt for monthly/quarterly/annual SWP option

1) Reliance Retirement Fund

Options Exit Load Lock In Period

-Wealth Creation Plan (65%-100% Equities)
-Income Generation Plan (0%-35% Equities)

1% up to age of 60
5 Years

2) HDFC Retirement Saving Fund

Options Exit Load Lock In Period

- Equity Plan (80%-100% Equities),
- Hybrid Equity Plan (60%-80% Equities), and
- Hybrid Debt Plan (5%-30% Equities)

1% up to age of 60
5 Years

3) Franklin India Pension Fund

Options Exit Load Lock In Period

- Upto 40% In Equities

3% up to age of 58
3 Years

4) UTI Retirement Benefit Pension Fund

Options Exit Load Lock In Period

- up to 40% in Equities

i) 5% up to 1 year,
ii) 3% for 1-3 years,
iii) 1% on more than 3 years and up to age of 58

Nil

How are Retirement mutual funds better than traditional pension plans?

• There is no need to buy an annuity, as is the case with the National Pension Scheme (NPS) or pension plans from insurance companies. Instead, one can opt for a systematic withdrawal plan to meet the regular cash flow needs

• NPS restricts equity exposure to 50%. However, there are mutual fund retirement schemes where one can take a 100% equity exposure

• Mutual funds’ pension products offer greater liquidity as the investor can withdraw the accumulated corpus after the lock-in period is over

Retirement Mutual Fund Scheme and Taxation

1) Equity

a) Less Than One Year: 15% Tax applicable 

b) 1-3 Years: 10% above Rs. 1,00,000 capital gains 

c) More Than 3 Years (LTGC): 10% above Rs. 1,00,000 capital gains 

2) Debt

a) Less Than One Year: Based on Individual’s Tax Slab 

b) 1-3 Years: Based on Individual’s Tax Slab 

c) More Than 3 Years (LTGC): 20% above Rs. 1,00,000 capital gains 

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