Why MF Companies lined up for retirement linked pension plan mutual funds?

Retirement linked pension plan mutual fundsWhy MF Companies lined up for retirement linked pension plan mutual funds?


In last budget, Govt. of India has announced tax benefits for retirement linked pension plan mutual funds. Many mutual fund companies are approaching the capital market regulator, SEBI to launch pension plan mutual funds. While these retirements lined pension plan mutual funds provide tax benefits, these are expected to provide better returns than current pension plans offered by insurance companies. I would provide more insights about the retirement linked pension plan MF’s in this article.

Also Read: Should you invest in Varshitha Pension Bima Yojana from LIC for Sr. Citizens?

What are Retirement Linked Pension Plan Mutual Funds?


These mutual fund schemes are aimed to protect capital, but invest in various segments of equity and debt. Currently, most of the MF companies who applied NFO prospectus are offering 3 plans, conservative, moderate and dynamic. Based on the age and risk appetite, one can choose a plan from these 3 categories. One would also get tax benefit upto Rs 1.5 Lakhs u/s 80C by investing in such plans.

Let me give you few features of the LIC Nomura Retirement Fund, which applied draft prospectus to SEBI. Majority of such funds would have similar features.

Features of LIC Nomura Retirement Fund


  • It has 3 plans, Conservative, Moderate and Dynamic plan.
  • This is an open ended scheme.
  • Investment objective it to provide comprehensive retirement saving solutions that need to invest through long term diversified investments in the major asset classes.
  • Investment in such retirement linked pension plan mutual funds would be eligible for Rs 1.5 Lakhs tax  benefit u/s 80C.
  • Such schemes are expected to invest in equity, equity related instruments, debt and money market instruments. The portfolio would depend on the plan chosen by the investor.

Why MF Companies lined up for retirement linked pension plan mutual funds?


  • As we know only insurance companies can offer pension plans earlier, this move to offer pension plans by mutual fund houses would provide great opportunities for mutual fund companies as well as investors.
  • Currently only UTI retirement benefit pension fund and Franklin Retirement Pension fund are offering a pension plan mutual funds. LIC Nomura is the lastest to join in this segment considering the large potential in this business segment. The reliance mutual fund already got approval for such plans.
  • Apart from LIC Nomura, other fund houses like SBI MF, Axis MF, DSP BR MF, IDBI MF, Birla SL MF etc., has approached the capital market regulator, SEBI with draft prospects to launch pension plan mutual funds.
  • Fund houses lining up such retirement fund schemes as Govt. Of India has announced tax benefits in the last budget. 
  • Retirement is one of the largest segments in investment all over the world, which is still not capitalized in India. Mf companies want to encash such opportunities.

Also Read: How to invest lump sum money in mutual funds to get higher returns?

Conclusion: Retirement Linked Pension plan mutual funds could be a good opportunity compared to pension plans of insurance companies. Performance of pension plans of insurance companies is difficult to track. It is difficult to choose a best pension plan. However, in future, pension plan mutual fund performance can be tracked like any other fund and invest wisely. This is surely a welcome move that several MF companies are approaching SEBI to launch pension plan mutual funds.

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Suresh
MF Companies lined up for retirement linked pension plan mutual funds

The Author

Suresh KP

Suresh KP i.e. me have written 1,800+ articles on this blog. I have done by B.Com from Osmania University and then MBA-Finance from Symbiosis University, Pune. I have over 20 years of experience in analyzing various investment options and money saving ideas. I love doing financial planning, Mutual Fund Analysis, Searching long term Stocks for wealth creation, IPOs, reviewing Insurance Products, analysing Health insurance Plans etc.

13 Comments

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  1. Sir

    Which retirement linked pension MF plan are good for future.

  2. Hello sir,, Any international mutual funds invest now for long term,,, i read your post that 2013 (international mutual funds).. but now any international mutual funds for long term , 5 to 10 yr….
    Thanks.

  3. What is the tenure of investment for such schemes. Should we invest till retirement? Or we can just lock in for three years and withdraw on these funds?

    1. All mutual funds where tax exemptions are given has a lock-in period of 3 years. You can withdraw funds after 3 years

  4. Hi Suresh,

    Nice article but I have some doubts. Any idea how would these retirement MF’s are different to the already existing MF’s. What is so special about these that the current ones cannot do? I mean if these retirement MF’s are open ended, then people are open to withdraw their investments just like any MF. So how are they encouraging people to save and invest for retirement !!??

    1. Existing funds have a specific objective i.e. long term appreciation. However retirement linked pension plan funds are not long term appreciation. They provide appreciation and safeguard money too. 

  5. How different will the new plans be with respect to existing ones like Franklin templeton? There are already pure equity, debt and balanced funds in almost all MF. So adding a new fund category like pension plans under the 3 types will decrease the NAV of existing ones.

    1. new funds have nothing to do with existing funds NAV. These are designed for specific purpose i.e. providing appreciation along with safeguarding capital

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