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Plan for Retirement

Life after retirement is like second innings of one’s life after years of hard work. It is time when one gets to fulfil their dreams like travelling or pursuing a hobby. To live a comfortable retired life, one requires a regular flow of income which should be planned when you are earning. For this, not only consistent saving is important but also investing in the right instrument to build a retirement fund corpus that can ensure a regular flow of income for the retired life.

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.

Some of the Retirement Mutual Fund Schemes

1) Reliance Retirement Fund

Features Exit Load Lock-in Period

2 options:

 

  • Wealth Creation Plan (65%-100% Equities)
  • Income Generation Plan (0%-35% Equities)
1% up to age of 60
5 years

2) HDFC Retirement Savings Fund

Features Exit Load Lock-in Period

3 Options:

  • 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

Features Exit Load Lock-in Period

One option:

  • up to 40% in Equities

 

3% up to age of 58

3 Years

4) UTI Retirement Benefit Pension Fund

Features Exit Load Lock-in Period

One option:

  • up to 40% in Equities

 

  • 5% up to 1 year,
  • 3% for 1-3 years,
  • 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 funds 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 Schemes and Taxation

Less than 1 year 1-3 years More than 3 years (LTCG)
Equity
15% Tax applicable
10% above ₹1,00,000 capital gains
10% above ₹1,00,000 capital gains
Debt
Based on Individual’s Tax Slab
Based on Individual’s Tax Slab
20% Tax applicable with the benefit of indexation