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Business News/ Mutual Funds / Retirement mutual funds: Why should you opt for these schemes? 3 key reasons explained
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Retirement mutual funds: Why should you opt for these schemes? 3 key reasons explained

Retirement funds are part of solution-oriented mutual funds which have a lock-in period of five years, thus helping investors to stay invested for long

There are 27 retirement mutual funds with total asset size of ₹24,489 crore Premium
There are 27 retirement mutual funds with total asset size of 24,489 crore

One of the key financial goals of retail investors is to ensure wealth creation for retirement and children’s education. Aside from an array of equity and debt mutual fund schemes, investors can opt for the bespoke policies meant for retirement.

There are 27 retirement mutual funds in the broader category of solution-oriented schemes with total asset size of 24,489 crore. Retirement mutual funds have a lock-in period of five years, enabling investors to stay invested for long for an effective retirement planning.

The other sub-category of children’s funds has a total of 11 schemes with total asset under management of 18,736 crore, shows the AMFI (Association of Mutual Funds in India) data as on Jan 31, 2024.

Why should you invest?

1. Long term wealth creation: These schemes are meant for long term wealth creation. In case you have not subscribed to NPS or PPF, then this can help you create substantial corpus to be used in your old age.

2. Inflation: Regardless of your savings for retirement, high inflation can ruin your financial goals to a great extent. So, it is advisable to accumulate as much investment as you can so that your lifestyle does not suffer because of inadequate retirement funds.

3. Lock-in: Retirement mutual funds, just as other solution-oriented schemes, have a five-year lock-in period. As a result, these schemes play a key role in helping investors stay invested for long and make the most of their exposure to equity.

Largest retirement funds

Some of the most popular retirement mutual funds based on their asset size include HDFC Retirement Savings Fund - Equity Plan, UTI Retirement Fund, Nippon India Retirement Fund - Wealth Creation Scheme, SBI Retirement Benefit Fund - Aggressive Plan, Tata Retirement Savings Moderate and Tata Retirement Savings Progressive.

Retirement mutual funds                                                                 AUM ( crore)
HDFC Retirement Savings Fund - Equity Plan                      4,676.70
UTI Retirement Fund                                                                       4,313.73
Nippon India Retirement Fund - Wealth Creation Scheme          2,977.25
SBI Retirement Benefit Fund - Aggressive Plan                            2,145.42
Tata Retirement Savings Moderate                                           1,895.38
Tata Retirement Savings Progressive                                                1,717.04

(Source: AMFI; returns as on Feb 21, 2024)

Top-performing funds

The top-performing retirement mutual funds have delivered one-year return that varies between 35 to 52 per cent. As the table below shows, the highest return was given by ICICI Prudential Retirement Fund - Pure Equity Plan that delivered a return of 52.8 per cent whereas the other schemes delivered a return in the range of 35 to 44 per cent per annum.

Retirement mutual funds                                                              1-year-return (%)
ICICI Prudential Retirement Fund - Pure Equity Plan                                  52.84
ICICI Prudential Retirement Fund - Hybrid Aggressive Plan                      44.18
HDFC Retirement Savings Fund - Equity Plan                                    36.74
Union Retirement Fund                                                                                35.36

(Source: AMFI; returns as on Feb 21, 2024)

As the table above shows, the highest return was given by ICICI Prudential Retirement Fund - Pure Equity Plan that delivered a return of 52.8 per cent whereas the other schemes delivered a return in the range of 35 to 44 per cent per annum. 

Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.

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Published: 26 Feb 2024, 01:45 PM IST
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