Top 5 Retirement Mutual Funds: Retirement mutual funds are solution-oriented funds meant to serve the purpose of retirement. As per the SEBI guidelines, these funds have a five-year lock-in period or the retirement age of 60, whichever comes earlier.
Securities Exchange Board of India (SEBI) has allowed mutual fund houses to run these funds as equity funds, hybrid funds, and debt funds.
There are 25 fund plans from 10 mutual fund houses available at present with assets under management (AUM) of Rs 21,758.91 crore.
Retirement funds offer steady and fixed benefits and are known as relatively safer options for retirement.
Where do retirement mutual funds invest money?
Retirement mutual fund houses mostly invest their money in low-risk investment options, e.g., government securities, to ensure a steady return to their investors.
An investor in a retirement mutual fund is tax-exempt up to the maximum limit of 1.5 lakh under 80 CCC of the Income Tax Act.
The investments for tax exemption include the new plan and renewals of existing plans.
Since the plans come under an annuity, any withdrawal from the fund is taxable.
Along with that, while the periodical payment of pension is taxable, the disbursement of the total amount post retirement is either partially exempted or fully exempted under different conditions.
Since five years is the lock-in period for these funds, ZeeBiz take you through the list of retirement funds (as per AMFI) that have given the maximum annualised returns in the last five years.
HDFC Retirement Saving Fund – Equity Plan
The equity plan started in February 2016 has an AUM of Rs 3801.68 crore.
It has given annualised returns of 19 per cent in its regular plan and 20.49 per cent in its direct plan in the five-year period.
The fund has outpaced its benchmark index, the Nifty 500, which has grown 15.60 per cent in the same duration.
The net asset value (NAV) for the regular plan of the fund as on October 16 is Rs 37.85, while for the direct plan, it is Rs 42.05.
The fund’s expense ratio is 1.87 per cent against the category average of 1.95 per cent.
The fund has 88.99 per cent of its investments in equities with HDFC Bank, ICICI Bank, Infosys, and RIL being its main stocks in the portfolio.
An Rs 10,000 SIP investment in the regular plan of the fund five years ago would have given Rs 1,061,654 in the current value.
HDFC Retirement Savings Fund Hybrid Equity Plan
Launched in February 2016, the plan has Rs 1,15.01 crore in its AUM.
The fund has given an annualised return of 14.50 per cent in its regular plan and 15.94 per cent in its direct plan.
Its benchmark index, the Nifty 50 Hybrid Composite Debt, has, meanwhile, risen 12.76 per cent in the five-year period.
The NAVs as on October 16 stand at Rs 30.52 for the regular plan and Rs 33.94 for the direct plan.
The fund’s expense ratio of 2.16 per cent is better than the category average of 1.95 per cent.
The very high-risk fund has 71.54 per cent of its investment in equities, 17.32 per cent in debt, and 11.14 per cent in others.
HDFC Bank, ICICI Bank, RIL, and State Bank of India are its main stocks in a portfolio of 66 stocks.
An SIP of Rs 10,000 a month in its regular plan would have become Rs 906,162.6 at present.
Tata Retirement Savings Progressive
The fund from the House of Tata Mutual Fund was started in November 2011 and has grown to the size of Rs 1,540.26 crore.
The fund’s regular plan has given annualised returns of 13.28 per cent in the past five years, while its direct plan has given annualised returns of 15.09 per cent during the same period.
The NAV of the fund’s regular plans stood at Rs 49.330 as on October 16, while for the direct plan, it was Rs 58.390.
The fund, with an expense ratio of 2.08 per cent, has 94.88 per cent of its investments in equities with 32.09 per cent of them being large caps.
In a bouquet of 56 stocks, it has its main stocks as HDFC Bank, ITC Limited, RIL, and ICICI Bank.
An SIP worth Rs 10,000 invested every month in the fund’s regular plan in the last five years would have become Rs 854,435.90 in today’s value.
Tata Retirement Savings Moderate
Another fund from the House of Tata Mutual Fund has given annualised returns of 12.34 percent in its regular plan and 14 per cent in its direct plan in the last five years.
The Rs 1770.13 crore fund’s NAV for the regular plan stood at Rs 49.53 as on October 16, while for the direct plan, it was Rs 57.54.
The very high-risk fund has an expense ratio of 2.05 per cent.
The fund has 83.54 per cent of its investments in equities with 27.17 per cent of them being large caps.
The top stocks in the fund’s portfolio are HDFC Bank, RIL, ITC Limited, and ICICI Bank.
Had one invested Rs 10,000 in the fund’s SIP every month, they would have got Rs 838,605.12 in today’s time.
Nippon India Retirement Fund Wealth Creation Scheme
The retirement fund that came into existence in February 2015 is a very high-risk fund with a size of Rs 2,659.46.
The fund’s annualised returns in the last five years for the regular plan are 11.25 per cent and 12.39 per cent for the direct plan.
Its NAV as on October 16 was Rs 21.51 for the regular plan and Rs 23.82 for the direct plan.
With a 1.96 per cent expense ratio, the fund is performing slightly better than its category average of 1.95 per cent.
The fund has 99 per cent of its investments in equities, of which 53.01 per cent are large caps.
In a portfolio of 57 stocks, the fund’s main stocks are HDFC Bank, ICICI Bank, RIL, and Bosch Ltd.