Best Retirement Funds to Invest in India
After the release of SEBI’s mandate of re-categorization and rationalization, a new basket of equity mutual fund schemes was introduced which include equity schemes serving a particular solution, such as child education or retirement planning. They are the best investment option for creating a big retirement corpus today. Why? Read the blog to the end to find out your answer!
Table of Content
Retirement planning is one of the most important financial goals to be fulfilled by any individual. Most of us don’t start early planning for life after retirement and end up thinking what to do when the time appears. Early retirement planning helps one in taking appropriate risk with money and let it grow into a corpus for the retirement years. Gone are the days when pension plans from insurance companies, PPF, NSC, and EPF were the only few of the possible options that people associate with retirement planning. If you are someone who is comfortable taking a bit of risk with your money, then mutual funds can be the best option for you to plan a happy retirement.
Why Choose Mutual Funds to Plan Retirement?
Some of the features that make mutual funds an ideal choice for retirement are:
- Inexpensive Solution
Investment in a retirement mutual fund can be initiated via SIP with an investment amount of just Rs. 500 in most of the schemes. - High Returns
Retirement mutual funds belong to equity category which is known to provide the best returns that all asset classes. - Help Beat Inflation
As we grow, the inflation could also grow higher, thus making the cost of living even higher. In such case, mutual funds grow at par or even better with the inflation rates. - Liquidity
Lock-ins in mutual funds are usually of 5 years, unlike pension schemes such as PPF which have a mandatory lock-in of 15 years providing them an upper hand even in the liquidity aspect.
Comparison: Mutual Funds, Insurance, and NPS
1. Mutual Funds and Insurance
Insurance and Mutual Funds are both essential and are required for retirement savings. Insurance offers life & financial risk cover to you and your family, whereas mutual funds invest your money in market-linked instruments to create wealth in future.
- Returns
Depending upon your risk profile, time horizon, spending needs etc., a diversified portfolio of mutual funds can help you earn an annual return of 12-15% (vis-à-vis 6-7% of insurance). - Risk Coverage
If you want life risk (death/disability/accidents) to be covered, get an insurance policy. Some policies provide survival benefit and have additional bonuses. In case of mutual funds, the risk is high on investment and additionally, there is no life cover offered.
2. Mutual Funds and NPS
| Category | NPS | Mutual Funds |
|---|---|---|
| Liquidity | Partially liquid with rigid rules | Highly liquid |
| Flexibility | Rigid as annuity purchase is mandatory on withdrawal | Highly flexible as the fund deployment is dependent on the choice of investor |
| Asset Class Choice | Equities, Government Bonds and Securities only. | Vast array of asset class choices are available. |
| Age Limit | 65 Years | No age limit |
| Restriction on Choice of Fund Manager | High restriction (one fund manager has to be selected from 8 PFMs identified by PFRDA | No restriction |
| Cost | Low | Comparatively higher than NPS |
| Maximum Permissible Limit on Equity | 50% | No limit |
How to Choose the Best Retirement Mutual Fund?
When choosing mutual funds, it is important to perform appropriate research before choosing an ideal retirement fund for oneself. Listed below are the things you should check before finalizing the best retirement fund for yourself.
- Years Left for Retirement
In the early years of employment, i.e., in the age between 22 to 35 years, one can choose to invest in a moderate risk fund with steady growth and appreciating returns. The older you grow, the more aggressive you’ll have to be to ensure that you have enough to beat inflation during retirement age. Starting early will help you to plan your savings efficiently, so that you live comfortably after your employment years. - Risk Tolerance
Every investor has a risk level with which he/she is comfortable. There are some people who are overcautious, some are wise, whereas others are more of risk-takers. One must choose a fund, especially if it is a retirement fund according to the level of your standard. - Objective
Depending upon your aim of investment, you can look for growth or stable savings where you have the option to invest in various types of mutual funds including equity, debt, hybrid, value, etc. One can mix and match different fund types and portfolios to get the right diversity in order to attain capital increase and stable source of income. - Additional Expenses
It is of crucial importance to check various exit and entry loads that come with every mutual fund which include exit and entry load, management fees, expense ratio, etc. In case the fund size is small with limited AUM, then such charges are likely to be higher.
Top Retirement Mutual Funds to Invest in 2018
The experts of MySIPonline have listed the top five retirement plans that will help you enjoy your post-retirement era without being dependent on anyone. Let’s find out more about them!
1. Tata Retirement Savings Fund- Progressive Plan (G)
The aim of Tata Retirement Savings Fund is to maximize wealth in the initial years of investment and provide stabilized returns in the old age. The processing of goal fulfillment in Tata Retirement Savings Fund- Progressive Plan is carried out with an additional facility of auto-switch. Investors of age less than 45 years can invest it. It has a slightly aggressive equity portfolio to stretch the invested amount. Tata Retirement Savings Fund- Progressive Plan NAV as on September 3, 2018 is Rs. 30.37.
Fact Sheet
| Category | Multi Cap |
| Benchmark | S&P BSE Sensex TRI |
| Launch Date | 11/1/2011 |
| Asset Size | Rs. 518 crore (As on Jul 31, 2018) |
| Fund Managers | Mr. Sonam Udasi, Mr. Murthy Nagarajan, and Ms. Ennette Fernandes |
| Expense Ratio | 2.28%(As on Jul 31, 2018) |
| Minimum Lumpsum | Rs 5,000 |
| Minimum SIP | Rs 500 |
| Exit Load | 1% for redemption before 60 years of age |
Asset Allocation:
Tata Retirement Fund (G) - SIP and Lumpsum Investment
| 3-Years SIP Returns | ||||||
|---|---|---|---|---|---|---|
| Fund Name | Cumulative Investment | Growth Value | Absolute Returns | XIRR | ||
| Tata Retirement Savings Fund - Progressive Plan (G) | 36000 | 47239 | 31.22% | 18.43% | ||
| 3-Years Lumpsum Returns | ||||||
| Fund Name | Investment 3-Years ago | Growth Value | Absolute Returns | CAGR | ||
| Tata Retirement Savings Fund - Progressive Plan (G) | 100000 | 145012 | 45.01% | 13.16% | ||
| Returns: As on March 31, 2018 | ||||||
2. HDFC Retirement Savings Fund-Hybrid-Equity Plan-Reg (G)
This scheme from HDFC Mutual Fund aims to provide long-term capital appreciation along with a regular source of income with investment in a mix of equity and debt instruments to help investors meet their retirement goals. HDFC Retirement Savings Fund- Hybrid Equity Plan NAV as on September 3, 2018 is Rs. 16.56.
Fact Sheet
| Category | Aggressive Hybrid |
| Benchmark | NIFTY 50 Hybrid Composite Debt 65:35 |
| Launch Date | 2/25/2016 |
| Asset Size | Rs. 185 crore(As on Jul 31, 2018) |
| Fund Managers | Mr. Chirag Setalvad, Mr. Rakesh Vyas, and Shobhit Malhotra |
| Expense Ratio | 2.86%(As on Jul 31, 2018) |
| Minimum Lumpsum | Rs 5,000 |
| Minimum SIP | Rs 500 |
| Exit Load | 0% |
Asset Allocation
HDFC Retirement Savings Fund-Hybrid-Equity Plan-Reg (G) - SIP and Lumpsum Investment
| 1-Years SIP Returns | ||||||
|---|---|---|---|---|---|---|
| Fund Name | Cumulative Investment | Growth Value | Absolute Returns | XIRR | ||
| HDFC Retirement Savings Fund - Hybrid - Equity Plan - Regular Plan | 12000 | 12317 | 2.64% | 5.79% | ||
| 1-Years Lumpsum Returns | ||||||
| Fund Name | Investment 1-Years ago | Growth Value | Absolute Returns | CAGR | ||
| HDFC Retirement Savings Fund - Hybrid - Equity Plan - Regular Plan | 100000 | 109799 | 9.79% | 10.72% | ||
| Returns: As on March 31, 2018 | ||||||
3. Reliance Retirement Fund Wealth Creation Scheme (G)
This is a new wealth creation scheme introduced in India which belongs to the multi-cap category. It has the power to offer good returns and a stable portfolio. Undoubtedly, Reliance Retirement Fund is one of the most preferred options in India for devising a functional retirement plan. It hasn’t got time to experience all market cycles, and therefore it will be unfair to judge it too soon. However, it has performed way better than its peers and benchmark. Reliance Retirement Fund Wealth Creation Scheme NAV as on September 3, 2018 is Rs. 14.01.
Fact Sheet
| Category | Multi Cap |
| Benchmark | S&P BSE 500 TRI |
| Launch Date | 2/11/2015 |
| Asset Size | Rs. 1342 crore (As on Jul 31, 2018) |
| Fund Managers | Mr. Sanjay Parekh, Ms. Kinjal Desai, and Ms. Anju Chajjer |
| Expense Ratio | 2.59%(As on Jul 31, 2018) |
| Minimum Lumpsum | Rs 5,000 |
| Minimum SIP | Rs 500 |
| Exit Load | 0% |
Asset Allocation
Reliance Retirement Fund Wealth Creation Scheme (G)- SIP and Lumpsum Investment
| 3-Yrs SIP Return | ||||||
|---|---|---|---|---|---|---|
| Investment(SIP Rs. 1000/month) | Growth Value | Absolute Returns | XIRR | |||
| Reliance Retirement Savings Fund-Wealth Creation (G) | 36000 | 43891 | 21.92% | 13.28% | ||
| Return: As on March 31, 2018 | ||||||
| 3-Year Lumpsum Return | ||||||
|---|---|---|---|---|---|---|
| Investment | Growth Value | Absolute Returns | CAGR | |||
| Reliance Retirement Savings Fund-Wealth Creation (G) | 100000 | 131,955 | 31.96% | 9.67% | ||
| Return: As on March 31, 2018 | ||||||
4. Franklin India Pension Fund (G)
Franklin India Pension Plan by Franklin India Mutual Fund fulfills multiple purposes of investment by investing in a balanced portfolio consisting of equity and debt instruments. It offers secured and stable returns along with the benefit of tax saving under section 80C. It seeks to generate steady returns through a portfolio of up to 40% in equities with the balance invested in fixed income instruments. Franklin India Pension Fund (G) NAV as on September 04, 2018 is Rs. 123.61.
Fact Sheet
| Category | Hybrid: Balanced Hybrid |
| Benchmark | CRISIL Composite Bond (60), NIFTY 500 TRI (40) |
| Launch Date | 3/31/1997 |
| Asset Size | Rs. 429 crore (As on Jul 31, 2018) |
| Fund Managers | Lakshmikanth Reddy, Sachin Padwal- Desai, and Umesh Sharma |
| Expense Ratio | 2.32%(As on Jul 31, 2018) |
| Minimum Lumpsum | Rs 5,00 |
| Minimum SIP | Rs 500 |
| Exit Load | For redemption before 58 years of age |
Asset Allocation
Franklin India Pension Fund (G)- SIP and Lumpsum Investment
| 3-Years SIP Returns | ||||||
|---|---|---|---|---|---|---|
| Fund Name | Cumulative Investment | Growth Value | Absolute Returns | XIRR | ||
| Franklin India Pension Plan-Growth | 36000 | 39837 | 10.65% | 7.04% | ||
| 3-Years Lumpsum Returns | ||||||
| Fund Name | Investment 3-Years ago | Growth Value | Absolute Returns | CAGR | ||
| Franklin India Pension Plan-Growth | 100000 | 123870 | 23.87% | 7.59% | ||
| Returns: As on March 31, 2018 | ||||||
5. Tata Retirement Savings Fund - Moderate Plan (G)
Tata Retirement Savings Fund - Moderate Plan seeks to provide a financial planning tool for long term financial security for investors willing to fulfill their retirement planning goals. It is a moderately-high risky fund with more than 75% allocation in equities, 19.91 in debt instruments, and the rest 4.41% in cash and cash eq. Tata Retirement Savings Fund- Moderate Plan NAV as on September 04, 2018 is Rs. 30.45.
Fact Sheet
| Category | Aggressive Hybrid |
| Benchmark | CRISIL Hybrid 25+75 Aggressive Index |
| Launch Date | 11/1/2011 |
| Asset Size | Rs. 856 crore(As on Jul 31, 2018) |
| Fund Managers | Murthy Nagarajan, Sonam Udasi, and Ennettee Fernandes |
| Expense Ratio | 2.42%(As on Jul 31, 2018) |
| Minimum Lumpsum | Rs 5,000 |
| Minimum SIP | Rs 500 |
| Exit Load | For redemption before 60 years of age |
Asset Allocation
Tata Retirement Savings Fund - Moderate Plan (G)- SIP and Lumpsum Investment
| 3-Yrs SIP Return | ||||||
|---|---|---|---|---|---|---|
| Investment(SIP Rs. 1000/month) | Growth Value | Absolute Return | XIRR | |||
| Tata Retirement Savings Fund - Moderate Plan- Regular - Growth | 36000 | 45471 | 26.31% | 15.74% | ||
| Return: As on March 31, 2018 | ||||||
| 3-Year Lumpsum Return | ||||||
|---|---|---|---|---|---|---|
| Investment | Growth Value | Absolute Return | CAGR | |||
| Tata Retirement Savings Fund - Moderate Plan- Regular - Growth | 100000 | 140082 | 40.08% | 11.87% | ||
| Return: As on March 31, 2018 | ||||||
Comparison of Top Retirement Schemes: Trailing Return, Rolling Returns, and Risk
| Comparison Table | ||||||
|---|---|---|---|---|---|---|
| Fund | Launch | 1-Year Return | 3-Year Return | 5-Year Return | Expense Ratio (%) | Assets Rs (Cr) |
| Tata Retirement Savings Fund - Progressive Plan (G) | 1-Nov | 9.72 | 18.49 | 22.96 | 2.28 | 518 |
| HDFC Retirement Savings Fund (G) | Feb-16 | 9.55 | - | - | 2.86 | 185 |
| Reliance Retirement Fund - Wealth Creation Scheme (G) | Feb-15 | 7.72 | 13.05 | - | 2.59 | 1,342 |
| Franklin India Pension Plan (G) | Mar-97 | 4.43 | 8.44 | 13.49 | 2.32 | 429 |
| Tata Retirement Savings Fund - Moderate Plan (G) | 1-Nov | 8.52 | 15.56 | 22.96 | 2.42 | 856 |
| Trailing Returns as on September 04, 2018 | ||||||
Rolling Returns
| Scheme Name | July 2015 to June 2016 | Jan 2016 to Dec 2016 | July 2016 to June 2017 | Jan 2017 to Dec 2017 | July 2017 to June 2018 |
|---|---|---|---|---|---|
| Tata Retirement Savings Fund - Progressive Plan (G) | 72.62% | 64.05% | 63.49% | 65.28% | 53.67% |
| Tata Retirement Savings Fund-Moderate Plan | 3.23% | 6.45% | 22.42% | 38.14% | 10.97% |
| Reliance Retirement Fund-Wealth Creation | -0.09% | -1.86% | 18.97% | 37.41% | 8.00% |
| HDFC Retirement Savings Fund - Equity Plan | - | - | 23.20% | 37.16% | 7.88% |
| Franklin India Pension Plan-Growth | 6.96% | 8.02% | 10.32% | 12.48% | 2.91% |
Risk
| Risk Measures (%) | Mean | Std Dev | Sharpe | Sortino | Beta | Alpha |
|---|---|---|---|---|---|---|
| Tata Retirement Savings Fund - Progressive Plan (G) | 17.83 | 15.53 | 0.73 | 1 | 1.05 | 1.6 |
| HDFC Retirement Savings Fund (G) | NA | NA | NA | NA | NA | NA |
| Reliance Retirement Fund - Wealth Creation Scheme (G) | 12.66 | 14.1 | 0.44 | 0.55 | 1 | -3.08 |
| Franklin India Pension Plan (G) | 8.12 | 5.94 | 0.29 | 0.44 | 0.48 | -1.61 |
| Tata Retirement Savings Fund - Moderate Plan (G) | 15.03 | 12.04 | 0.71 | 1.07 | 0.95 | 1.98 |
Conclusion:
There is no fixed set of individuals for whom retirement plans are suitable. They are a must for every investor’s portfolio and also one must start investing as early as possible to accumulate the maximum wealth at the time of retirement. The above-mentioned schemes differ in terms of returns and risk. Thus, an investor should choose only that scheme which matches his/her risk appetite and investment goal in particular.
We hope that the above-discussed information can help you analyze the recommended retirement fund more deeply. Remember, the more the effort you put in your accumulation phase, the more you’ll be able to enjoy the distribution phase of your retirement. For more personalized advice on which fund to pick from the list mentioned above, don’t forget to consult our financial experts.
Must Read:
To learn about the best SIP plans of Reliance Mutual Fund, read 5 Best Reliance Mutual Funds for SIP in 2018
Do you know DSP Small Cap Fund is back with fresh SIP/STP investments? Read all about it here
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Best Funds
| Top funds | 1M Return | 6M Return | 1Y Return | 3Y Return | 5Y Return |
|
|
|---|---|---|---|---|---|---|---|
| Tata Retirement Savings Fund - Progressive Plan -Regular Plan-Growth Option | 1.36% | 22.91% | 37.89% | 16.35% | 19.08% | Invest | |
| Tata Retirement Savings Fund- Moderate Plan-Regular Plan-Growth Option | 1.31% | 20.01% | 31.71% | 15.14% | 17.6% | Invest | |
| Nippon India Retirement Fund- Wealth Creation Scheme- Growth Plan - Growth Option | 1.73% | 20.1% | 43.18% | 20.77% | 19.57% | Invest | |
| Franklin India Pension Plan-Growth | 1.06% | 9.5% | 20.34% | 10.49% | 10.71% | Invest | |
| HDFC Retirement Savings Fund - Hybrid-Equity Plan - Growth Option | 1.24% | 12.99% | 27.4% | 16.31% | 18.92% | Invest |