Judging a mutual fund performance calls for evaluating its returns vis-à-vis similar schemes under the same category for a period of time. Here we evaluate the returns of retirement funds in the past one year.
At the outset, we shed light on what are pension or retirement funds:
Retirement funds: A pension or retirement fund is a corpus that is created via a diverse mix of investments across asset classes over several years, and is meant to be utilised by the investor during their retired life for self or family or both.
There are some government-backed funds such as PPF (Public Provident Fund) and NPS (National Pension System), while some investors choose the mutual fund route to create a sizeable corpus that can help them sail through their retired life without having to depend on someone, albeit financially.
Here we take a look at the retirement mutual funds only.
The returns of most of these retirement mutual funds were in negative in past one year ending June 30, 2022 since equity markets have witnessed sharp correction lately.
Some of the fund schemes, however, showed positive returns which were close to or lower than five percent.
|Fund scheme||1-year-return (%)|
|ABSL R Fund - 50s Plus (Debt)||1.73|
|Axis R Savings Fund - Dynamic Plan||-4.60|
|HDFC R Savings Fund - Hybrid Equity Plan||1.59|
|SBI R Benefit Fund - Conservative Hybrid Plan||4.24|
|Tata R Savings Conservative||0.54|
(AMFI data as on June 30, 2022 for direct returns) (*R= retirement)
As shown in the table above, Aditya Birla Sun Life Retirement Fund (50s plus-debt) gave 1.73 percent return, Axis Fund delivered negative returns and HDFC Retirement savings fund gave 1.59 percent return.
There are, however, some retirement fund schemes which gave reasonably good positive returns.
As shown in the second table (below), ICICI Prudential Retirement Fund gave 19.38 percent return, SBI retirement fund (aggressive plan) gave 8.42 percent and SBI retirement fund (aggressive hybrid) gave 8.18 percent return. At the same time, UTI Retirement Benefit Pension Fund gave a little more than 5 percent return.
|Fund scheme||1-year-return (%)|
|ICICI Prudential R Fund - Pure Equity Plan||19.38|
|SBI R Benefit Fund - Aggressive Plan||8.42|
|SBI R Benefit Fund - Aggressive Hybrid Plan||8.18|
|UTI R Benefit Pension Fund||5.13|
Now with poor returns, one might wonder if this has thwarted the entire financial planning of retirees, particularly those who plan to hang up their boots this year. Financial experts do not agree with this as they argue that one doesn’t need to redeem all the fund units immediately after the retirement.
One can certainly plan it in a better way. The better idea is to opt for a systematic withdrawal plan (SWP).
It is the opposite of SIP (systematic investment plan) and in this, investors can withdraw a fixed amount from a mutual fund scheme at regular intervals such as monthly or quarterly.
Conservative towards retirement
Wealth advisors tend to say that aggressive equity allocation is meant for those investors who have many years left before they will retire. Those who are close to retirement are not advised to stay heavily invested in equity.
Deepesh Raghaw, Founder of PersonalFinancePlan says that your allocation to equity action should be decided by how far you are from retirement. “Portfolio should be aggressive especially when you are in your late 20s or early 30s but when someone is in 50s or 60s, portfolio should be conservative,” says Raghaw.
Amol Joshi, Founder of PlanRupee Investment Services says investing too heavily in equity is not advisable for anyone, particularly not for retirees.
“One can invest heavily in equity only when you can wait for between 5 to 10 years. But at the age of 57 to 58, one should refrain from investing too heavily in equity,” says Joshi.
Towards the retirement if the market fall is around 20 percent, then the corpus of ₹1 crore becomes ₹80 lakh. But investors should keep in mind that the corpus is meant to be used for the next 15 to 20 years.”
“A retiree can opt for a Systematic Withdrawal Plan in line with monthly expenses. They shouldn’t withdraw all the money right after the market fall,” explains Joshi.