In order to save for retirement, it is common among investors to opt for a retirement plan offered by an insurer or a Unit Linked Insurance Plan (ULIP) that doubles as an investment product too.
The mutual fund aficionados, meanwhile, can explore the option of buying the units of retirement funds in order to meet their long-term financial goals.
Although there is no restriction on the category of fund you opt for, some investors prefer the schemes that are designed for this very purpose i.e., retirement.
These funds have a lock-in for at least 5 years or till retirement age whichever is earlier, as per the Sebi’s guidelines on categorisation of mutual fund schemes.
Across the spectrum
There are a total of 26 retirement funds with total assets under management (AUM) of ₹20,200 crore.
Most of these funds are smaller funds with tiny assets under management (AUMs) of under ₹100 crore. The funds with large asset size include HDFC Retirement Savings Fund - Equity Plan ( ₹3,588 crore), Nippon India Retirement Fund - Wealth Creation Scheme ( ₹2,594 crore) and UTI Retirement Benefit Pension Fund ( ₹3,991 crore).
The same distinction is evident in the CAGR (compound annual growth rate) returns these plans deliver.
Some plans have given as high as 20-30 percent returns in the past three years, for instance, while others have delivered a paltry return of 4-5 percent during this period.
Types of retirement funds
Although these schemes serve one purpose — saving for retirement — they have different composition based on the specific goal they promise to achieve.
A few plans follow an aggressive hybrid investing strategy, some stick to a conservative strategy while others offer a debt plan. Similarly, some schemes are inclined towards creating pension funds, while others are meant for wealth creation.
It is noteworthy to mention that there is another category of solution-oriented schemes i.e., children’s funds. There are a total of 10 schemes in the second category of solution-oriented funds.
