Should you invest in Reliance Retirement Fund NFO?

Reliance Retirement Fund Pension SchemeShould you invest in Reliance Retirement Fund NFO?

Recently, Reliance Mutual Fund got SEBI nod and floated Reliance Retirement Fund NFO, which aims to generate superior returns by investing in equity and debt related instruments. While Franklin and UTI MF has floated similar retirement funds / pension funds, Reliance Retirement fund would be 3rd such plan in India focuses on retirement / pension. Reliance advertises this as Pension Plan and Notified Tax saving scheme. Should you invest in Reliance Retirement Fund New Fund Offer (NFO)? Does Reliance Retirement Pension Plan fund scores high compared to existing retirement / pension schemes?

Also Read: What are the features, Pros and Cons of New Pension Scheme / National Pension Scheme (NPS) ?

Features of Reliance Retirement Fund New Fund Offer (NFO)

  • This is open ended scheme.
  • Scheme opened for subscription on 22-Jan-2015
  • Scheme closes for subscription on 5-Feb-2015. It would reopen for further subscription after 5 working days after closure of the date.
  • Reliance Retirement Fund is available in two options i.e. Wealth Creation Equity Plan and Income Generation Scheme.
  • Wealth Creation equity plan objective is to invest 65% to 100% in equity oriented options and up to 35% in debt related instruments. This is suitable for accumulating funds till retirement. Since this invests in equity related options, Reliance MF expects that returns would be higher.
  • Income Generation Scheme plan objective is to invest 70% to 95% in debt related instruments and 5% to 30% in equity related instruments. This is a debt oriented scheme and suitable to invest retirement fund or who are nearing retirement.
  • Tax benefits available u/s 80C upto Rs 1.5 Lakhs of investment in this scheme. This is similar to ELSS Tax Saving Mutual fund schemes where such tax exemptions are available.
  • Switch among schemes available without any restrictions or limitations.
  • This scheme has lock-in period of 5 years.
  • An exit load of 1% applicable if MF units are redeemed/sold before 60 years of age.
  • This scheme is available for lump sum and SIP options.

Reliance Mutual Fund CIO, Mr. Sunil Singhania says “We intend to create wealth over the long term. The equity-oriented plan will be run like a balanced fund. It will be a diversified portfolio with 65-75 per cent in large caps and the remaining in quality mid caps.

How does this Reliance Retirement Fund NFO compares with existing pension plan schemes?

Currently there are UTI Retirement Benefit Fund Scheme and Franklin India Pension Plan Fund Scheme which is in this retirement/pension plan, fund segment, hence a quick comparison is given for ready reference

Portfolio: UTI Retirement Fund and Franklin India pension plan scheme invests up to 40% in equity and balance in fixed investment options. Hence, they are debt oriented schemes. On the other hand, the Reliance Retirement Fund is equity oriented where it invests 60% to 95% in equity options (wealth creation equity plan). However, under the income generation scheme, it invests 70% to 95% in debt. Means higher allocation is given to debt schemes in the Reliance Retirement Fund, income generation option.

Returns: UTI Retirement fund and Franklin India pension plan funds gave 10% to 13% annualized returns over last 5 years. Reliance Retirement Fund is a new fund, hence we need to wait and watch the performance. However, since it invests in equity options for long term, returns are expected to be high.

Tax benefits u/s 80C: Currently tax benefits upto Rs 1.5 Lakhs of investment u/s 80C is available for the Reliance Retirement Fund. No investment tax benefits available for other funds.

Should you Invest in Reliance Retirement Fund NFO?

Experts believe that one can invest in this fund till 50 years as they are equity oriented. After this they can shift to UTI Retirement Benefit Fund Scheme or Franklin India Pension Plan Fund as they are debt oriented schemes which have proven past record in last 15 years. Returns from equity funds are tax free after 1 year and returns from debt oriented funds on the other hand are taxable at 20% with indexation. However, such tax would be low as one would invest for over 10 years.

I am currently neutral about this mutual fund NFO. It is equity oriented and may provide higher returns compared to existing retirement fund schemes. If you are looking for tax saving funds, you can invest in top ELSS funds as they have already provided 15% returns along with 80C benefits. Since you are investing for long term, instead of investing in such packaged retirement schemes, you can invest in well diversified mutual funds for the long term. There are several best equity mutual funds which have provided over 15% returns and have proven performance. When you are nearing your retirement, you can think of shifting to debt schemes. In case you do not believe in equity, you can accumulate funds through EPF / NPS / PPF / VPF where you can get 8.5% to 8.75% annualized returns.  

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Should you invest in Reliance Retirement Fund NFO


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