Tata Retirement Savings Fund: Towards building a retirement kitty

The Tata fund offers three plans, catering to investors’ risk profile and life stage

Building your own retirement kitty is a must in a country like India where there is no social security to fall back on.

Given the rise in inflation and increase in life expectancy, it is important to ensure that your corpus does not fall short of post-retirement expenses.

At present there is a wide range of both guaranteed and market-linked retirement products that can help you build your nest egg. Aside from the default options such as Public Provident Fund (PPF), Employees’ Provident Fund (EPF) and National Pension Scheme (NPS), a few mutual funds offer plans for this specific purpose. The retirement plans offered by mutual funds are structured to suit the needs of the investors based on their risk profile and life stage. Tata, Franklin, UTI, Reliance and HDFC offer retirement plans with different options across equity and debt portfolio. However, there is no specific mandate or rule governing such funds.

Some funds offer you tax benefit under Sec 80C of IT Act. Franklin India Pension Plan and UTI-Retirement Benefit Pension fund provide the tax benefit with a lock-in period of three years while the plans provided by Reliance and HDFC mutual funds are eligible for tax benefit with a lock-in period of five years.

The plans offered by Tata Retirement Savings Fund are pure vanilla — regular mutual funds which do not provide tax benefit u/s 80C and do not carry a lock-in mandate. They offer three choices of asset allocation plans to investors.

What’s on the menu

Tata Retirement Savings Fund offers three plans — Progressive, Moderate and Conservative. Each plan follows a different investment approach to cater to the needs of different investors at different stages of their lifetime. All three plans have delivered consistently, outperforming their respective benchmarks and category since their launch.

Investors looking for a regular savings avenue for retirement can consider investing in any of three funds based on their age and risk preference.

All plans carry an exit load of 3 per cent if redeemed before three years and one per cent beyond that. No load after attaining 60 years.

For the young and daring

Tata Retirement Savings Fund - Progressive Plan focuses on young people (25-45 years) and aims to provide long-term wealth by investing at least 85 per cent of its assets in equities. This is suitable for high risk investors. This fund follows a multi-cap approach, allocating almost equal assets to large-cap and mid- small-cap stocks (53:47 as per the latest portfolio). The fund has delivered outperforming returns, thanks to its relatively higher allocation to the banking and financial sectors, coupled with higher mid- and small-cap exposure.

It has generated compounded annualised returns of 32, 24 and 19 per cent for one, three and five-year periods, respectively, against 26, 20 and 18 per cent delivered by the multi-cap category during these periods.

For the middle-aged

Moderate Plan (for people in the 45-60 year age bucket) aims to provide both growth and protection by investing at least 65 per cent in equities and the remaining in debt. The outstanding performance of the plan in recent periods is attributable to its higher allocation to mid- and small-cap stocks (49 per cent of equity assets). The plan has delivered returns of 28, 25 and 20 per cent during one, three and five-year periods while the Nifty50 posted 17, 11 and 12 per cent during these periods. The top three sectors are finance, bank and retail.

For retirees

The Conservative Plan aims to provide capital shielding by investing at least 70 per cent of the net assets in debt and up to 30 per cent in equities (currently 29 per cent is in equities of which one-third is in mid-cap stocks).

The debt portion is skewed towards G-Secs and highly rated corporate bonds. The plan takes medium duration calls. It has delivered returns of 16, 14 and 11 per cent during one, three and five-year periods while the category posted 13, 12 and 10 per cent.

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